MASTER 
NEGATIVE 

NO.  95-82371 


COPYRIGHT  STATEMENT 


The  copyright  law  of  the  United  States  (Title  17,  United  States  Code) 
governs  the  making  of  photocopies  or  other  reproductions  of  copyrighted 
materials  including  foreign  works  under  certain  conditions.  In  addition, 
the  United  States  extends  protection  to  foreign  works  by  means  of 
various  International  conventions,  bilateral  agreements,  and 
proclamations. 

Under  certain  conditions  specified  In  the  law,  libraries  and  archives  are 
authorized  to  furnish  a  photocopy  or  other  reproduction.  One  of  these 
specified  conditions  is  that  the  photocopy  or  reproduction  is  not  to  be 
"used  for  any  purpose  other  than  private  study,  scholarship,  or  research." 
If  a  user  makes  a  request  for,  or  later  uses,  a  photocopy  or  reproduction 
for  purposes  in  excess  of  "fair  use,"  that  user  may  be  liable  for  copyright 
infringement. 

The  Columbia  University  Libraries  reserve  the  right  to  refuse  to  accept  a 
copying  order  If,  in  Its  judgement,  fulfillment  of  the  order  would  Involve 
violation  of  the  copyright  law. 


Author: 


New  York  (N.Y.) 
Committee  on  Taxation 

Title: 

Final  report 


Place: 


New  York 

Date: 

1916 


.3 


COLUMBIA  UNIVERSITY  LIBRARIES 
PRESERVATION  DIVISION 

BIBLIOGRAPHIC  MICROFORM  TARGET 


MASTER   NEGATIVE  i 


ORIGINAL  MATERIAL  AS  FILMED  -    EXISTING  BIBLIOGRAPHIC  RECORD 


New  York  (City)     Committee  on  taxation. 
Pinal  report...       New  York,  1916. 
398  p.       261  cm. 


Committee  appointed  April  10,  1914,  by  Hon. John 
Purroy  Mitchell,   mayor. . 


^/ 


,^^ 


RESTRICTIONS  ON  USE: 


FILM  SIZE 


:   % 


jfVl 


TECHNICAL  MICROFORM  DATA 


DATE  FILMED: 


REDUCTION  RATIO:     \0-7< 


IMAGE  PLACEMENT:  lA  ^m 


IB     IIB 


INITIALS: 


I 


TRACKING  #  : 


0VP5? 


FILMED  BY  PRESERVATION  RESOURCES,  BETHLEHEM,  PA. 


> 


.<^ 


a^ 


^^. 


(Jl 

3 

B 


O" 

iqq  Q 
=.m 

Is 

1— ' I 

^< 
oorsi 

o 


^; 


•^s-. 


3 
3 


> 
CD 

a,  O 

o  m 
Q."n 

CD  O 

do 

CO 


X 

< 

N 


X 

M 


:> 


o 


^. 


.a? 


^. 


.^A 


^^7^ 


o: 


e: 


xPO 


^i 


e^ 


>^ 


^i5 


> 


ittm 


S 

o 

3 

9 


A^' 


> 
Ul 


.•v* 


A^- 


^ 


v^ 


o 

o 


Oi 


O 


pi5l5P|?|?|l|T 


Ch 


00 


b 


w  mil  CO 


00 


ro 
en 


1.0  mm 


1.5  mm 


2.0  mm 


ABCDEFGHIJKLMNOPQRSTUVWXYZ 
abca»fghi|klmnopqrstuwvi<yzl234567890 


ABCDEFGHIJKLMNOPQRSTUVWXYZ 
abcdefghi)klmnopqrstuvwxyzl234567890 


ABCDEFGHIJKLMNOPQRSTUVWXYZ 

abcdefghijklmnopqrstuvwxyz 

1234567890 


2.5  mm 


ABCDEFGHIJKLMNOPQRSTUVWXYZ 

abcdefghijklmnopqrstuvwxyz 

1234567890 


\&> 


s^ 


^ 


^^ 


V 


^ 


i. 


-"* 


f^ 


^^ 


^A 


^JW 
^ 


c^ 


4^ 


..** 


*<^ 


-^^ 


^^'  ^  V 

^%i^ 


m 

H 

O 
O 

■o  m  -o 
>  c  cd 

I  TJ  ^ 

0(/)     ; 

m 

30 

o 


'4^ 


•— ' 

i>a 

Ul 

o 

3 

3 

3 

3 

p 

W  r-j 


3i 

°i 
S| 

i  O 

H 

7* -4 

8 


5f> 


/>- 


i  At 


FINAL  REPORT 


OF  THE 


OMMITTEE  ON    lAXA 


THE  OTY  OF  NEW  YORK 


'3h1w 


;i  : 


a 


Columbia  (Hm'tif  wftp 

THE  LIBRARIES 


SCHOOL  OF  BUSINESS 


•    i 


v-> 


<* 


'^ 


i 


FINAL  REPORT 


OF  THE 


COMMITTEE  ON  TAXATION 


OF  THE 


CITY  OF  NEW  YORK 


<     «    •    «     : 


•  .  • 


»  «'•••• 


»        •     •  • 


'  ••• 

•  »       f 

»  »        • 

•     *  1  <  • 


♦   •  J «  •  •    » 


UA<g 


C_^^.  "> 


JlvUWT? 


Prof.  E 


Fts  I  7 '17 


THE  O'CONNELL  PRESS 

176  Park  Row 

New  York 


•      • 


.'•  •..« 


<      '• 


»        • 


•     «    •      • 
>        •  • 


•  ««     *      ••-^•»»''» 


•       •    • 


330— 2,000— '16 


•  ••  •     - 

•  •  t  I  > 


i      * 


r        fc      •     «       ■ 


CI 

V— 


v'»d^ 


I 


COMMITTEE  ON  TAXATION 


OF  THE  CITY  OF  NEW  YORK 


APPOINTED  APRIL  10    1914 


BY 


HONORABLE  JOHN  PURROY  MITCHEL,  MAYOR 


ALFRED  £.  MARLING,   Chairman 

EDWIN  R.  A.  SELIGMAN,    Chairman,  Executive  Committee 

FREDERIC  C.  HOWE.   Secretary 


ROBERT  S.  BINKERD 
GEORGE  CROMWELL* 
FRANK  HARVEY  FIELD 
JOSEPH  N.  FRANCOLINI 
JOHN  J.  HALLERAN 
HAMILTON  HOLT 
JEREMIAH  W.  JENKS 
ARDOLPH  L.  KLINE 
FREDERIC  C.  LEUBUSCHER 
WALTER  LINDNER 
CYRUS  C.  MILLER 


GEORGE  V.  MULLAN 
LOUIS  HEATON  PINK 
LAWSON  PURDY 
DAVID  RUMSEY 
OSCAR  R.  SEITZ 
FREDERIC  B.  SHIPLEY 
ROBERT  E.  SIMON 
FRANKLIN  S.  TOMLIN 
CHARLES  T.  WHITE 
DELOS  F.  WILCOX 
COLLIN  H.  WOODWARD 


LAURENCE  ARNOLD  TANZER,  Executive  Secretary 


♦Resigned  January  12,  1915. 


TABLE  OF  CONTENTS 


PAGE 

FINAL  REPORT   " 

STATEMENTS  ACCOMPANYING  REPORT. 

Part  One— Untaxing  of  Buildings. 

Majority  Report    • ^7 

Concurring  memorandum  by  Messrs.  Pink  and  Holt 35 

Minority*  Report   37 

Dissenting  memorandum  by  Mr.  Shipley    S9 

Dissenting  memorandum  by  Mr.  Binkerd    S9 

Dissenting  memorandum  by  Mr.  Tomlin    w 

Part  Two— Sources  of  Additional  Revenue. 

Preliminary  Statement    6' 

1.  Income  Tax — Majority  Report 64 

Concurring  memorandum  by  Mr.  Simon 66 

Concurring  memorandum  by  Messrs.  Purdy  and  Kline . .  66 

Concurring  memorandum  by  Mr.  Binkerd   67 

Concurring  memorandum  by  Messrs.  Mullan  and  Wood- 
ward   67 

Dissenting  memorandum  by  Mr.  Leubuscher   68 

Dissenting  memorandum  by  Messrs.  Wilcox  and  Howe  71 

Dissenting  memorandum  by  Mr.  Tomlin    72 

Dissenting  memorandum  by  Mr.  Shipley    73 

2.  Classified  Personal  Property  Tax — Majority  Report   73 

Dissenting  memorandum  by  Messrs.    Mullan,    Halleran 

and  Woodward  74 

Dissenting  memorandum  by  Mr.  Tomlin    84 

Dissenting  memorandum  by  Mr.  Shipley    84 

Memorandum  by  Mr.  Binkerd   84 

3.  Ability  or  Presumptive  Income  Tax — Majority  Report 85 

Concurring  memorandum  by  Mr.  Simon 91 

Concurring  memorandum  by  Messrs.  Purdy  and  Kline.  91 

Memorandum  by  Mr.  Binkerd 91 

M 


ii 


^'^ZT^ '^'"'°'^'"^^"'  by  Messrs.     Leubuscher     and  '■^'"' 

Dissenting  memorandum  by  Mr   wilcox ^" 

Dissenting  memorandum  by  Mr   Pink ^^ 

4.     I^^^rement  Tax  on  Land  Values-Majority  RepoVt' .■.■.■::.■■■■■  ,Z 

Concurrmg  memorandum  by  Messrs.  Marling  and  While  Z 

Concurnng  memorandum  by  Mr.  Simon    ..  °f 

Concurrmg  memorandum  by  Mr.  Binkerd   .  °! 

Concurrmg  memorandum  by  Mr    Wilcox         

SSnf  •"^'"°'^"^"-  by  Messrs.  Purdy'and'  inhe;;."  2 

and  2laT"°"''.  "^  ^"""     ^'"^^'     "^"^^«" 

Di^seming  memo'randum  b'y  ■Mess'rs." '  LeubuscheV  '  and  "^ 

5-    Super-Tax  on  Land  Values— "^ 

Memorandum  by  Messrs.  MuIIan  and  others 

Concurrmg  memorandum  by  Messrs.  Field  and'otheri'  III 

Concurnng  memorandum  by  Mr   Simon 

Djssentmg  memorandum  by  Prof.  SeTigman Ill 

D,je„tmg  memorandum  by  Messrs.     LeubusVheV "  and 

Dissenting  memorandum'  by  Mes'sVs.'  Puldy  and  Wilcox  I  !o 

Dissentmg  memorandum  by  Mr.  Tomlin  ^ 

Dissentmg  memorandum  by  Mr.  Binkerd     

lai 


EXHIBITS  ACCOMPANYING  REPORT. 

UNTAXING  OF  BUILDINGS. 
*'*'.t°SI„'^X?„K4?^««  "  "  <=■>"■""»' '"  Con. 

LT  i-    o  "  l'%^f  "^  ^^  ^^^  ^"^--^  ^'  bSCs  Upon  Rent       ^ 
Senes4.     On  the  Effect  of  the  Untaxing  of  Buildings  Upon  kblk         ' 
Revenue  and  Public  Credit 

^"?a|e  iSans'' ^!"^  ^'  ^'^  Unt;xi;y;rBu;id;ng;Upon  MoVt:       ''" 

134 

6 


Answers  to  Questions. 

PAGE 

Answers  Submitted  by  The  Society  to  Lower  Rents  and  Reduce 

Taxes  on  Homes 13c 

Answers  Submitted  by  Advisory  Council  of  Real  Estate  Interests  148 

Answers  Submitted  by  The  Real  Estate  Board  of  New  York...  153 

Answers  Submitted  by  Mr.  Stewart  Browne 162 

Answers  Submitted  by  Hon.  John  J.   Hopper,   Register  of  the 

County  of  New  York 170 


Briefs  Submitted  on  the  Untaxing  of  Buildings. 

Brief  of  The  Society  to  Lower  Rents  and  Reduce  Taxes  on  Homes  174 
Supplementary  Brief  of  said  Society  on  the  Effect  of  Untaxing 

Buildings  on  the  Construction  of  Large  Buildings 194 

Memorandum  of  said  Society  on  Some  Foreign  Precedents  for 

Exempting  Buildings  and  Heavier  Taxation  of  Land  Values  197 

Brief  of  Advisory  Council  of  Real  Estate  Interests 200 

Brief  of  The  Real  Estate  Board  of  New  York 206 

Brief  of  Mr.    Stewart    Browne    on    Exempting    Buildings    from 

Municipal  Taxation    208 

Brief  of  Mr.  Browne  on  Shifting  a  Tax  on  Land 215 

Letter  of  Mr.  James  W.  Sullivan,  Stating  the  Position  of  the 

American   Federation  of   Labor    221; 

Brief  of  Mr.  J.  P.  CoughHn 228 

Letter  of  Mr.  Charles  F.  Noyes '  *  *  230 

Brief  for  a  Super-Tax  on  Land  Values  Submitted  by  The  Society 

to  Lower  Rents  and  Reduce  Taxes  on  Homes 233 


TESTIMONY  TAKEN  AT  HEARINGS  ON  THE  UNTAXING 

OF  BUILDINGS. 

Hearing  Held  November  8,  1915. 

Testimony  of    Benjamin  C.  Marsh   2*18 

Stewart  Browne    247 

Herbert  E.  Jackson    2^0 

Richard  M.  Hurd   251 

Alfred   Bishop  Mason    259 

William  J.  Schieffelin   261 


! 


Hearing  Held  November  lo,  1915. 

Testimony  of   Clarence  H.  Kelsey  '^^^ 

Charles  T.  Root ^^3 

Adolph   Bloch    .' ^^ 

Frederick   L.   Cranford  ' ! ! ^'^^ 

Louis  V.  Bright  .  ^^^ 

Robert  D.  Kohn '." .' ! ! .' * ^^^ 

Dr.  Robert  Murray  Haig '.'.'.'.*.'.'.'.'.' .'*.\\\\\*  W;  *  J^ 

Hearing  Held  November  15,  1915. 
Testimony  of   Henry  De  Forest  Baldwin 

Allan  Robinson    ^^ 

Dr.  Robert  H.  Whitten  '  .* .' ""^^ 

Grace  Isabel  Colbron  .  ^^^ 

Statement    of    Laurence  M.  D.  McGuire ^^^ 

Testimony  of  James  R.  Brown  ^06 

E.  A.  Tredwell  .      ^^ 

308 

Hearing  Held  November  17,  1915. 
Testimony  of    Daniel   Cavanagh 

Peter  Aitken ....!.. ^'^ 

George  Alexander  Wheebck ^^f 

Cornelius  N.  Sheehan  ...  ^^^ 

James   P.   Kohler    .  ^^^ 

M.  W.   Norwalk    .....*!!.'.** ^^^ 

Benjamin   Doblin    ....*.*..... "  *  *  ^^^ 

Alexander  Law ^^^ 

Leo  Kenneth  Mayer ^^^ 

Mrs.  George  Alexander  Wheelock  \\...\ ^^^ 

Hearing  Held  November  32,  1915. 

Testimony  of    Robert  E.  Dowling 

Walter  Stabler   .....' 328 

Charles  O^Connor  Hennes'sy ^^\ 

Charles  H.  Ingersoll  ....  ^30 

William  H.  Chesebrough ^^^ 

Jesse  F.  Orton \\ 342 

David  A.   Clarkson    .....* 344 

Joseph  L.  Buttenwieser ^^^ 

350 

8 


Hearing  Held  November  24,  19 15. 

PAGE 

Testimony  of   Prof.  Joseph  French  Johnson  355 

Allan  Dawson    358 

Fabian   Franklin    3^^ 

Statement   of    De  Witt  Clinton  3^ 

Closing  Statement  of  Benjamin  C.  Marsh 3^ 


Appendix. 
Correspondence  Between  Delos  F.  Wilcox  and  Richard  M.  Kurd      371 


BILLS  PREPARED  BY  COMMITTEE. 


Ability  Tax  Bill  . . . . 
Increment   Tax    Bill 


Bills  for  Administrative  Changes: 

Bill  No.  I.     Amending  Tax  Law,  Section  4,  Sub-division  7 

Amending  Tax  Law,  Secton  12 , 

Amending  Tax  Law,  Section  45-a 

Repealing  Tax  Law,  Section  48 

Amending  Tax  Law,  Section  204 , 


Bill  No.  2 
Bill  No.  3 
Bill  No.  4 
Bill  No.  5 


379 
392 


395 
39^ 
39^ 
397 
398 


J» 


COMMITTEE  ON  TAXATION 


FINAL    REPORT 


January  5th,  1916. 

HON.  JOHN  PURROY  MITCHEL, 

Mayor  and  Chairman  of  the  Board  of  Estimate  and  Apportionment, 
City  of  New  York. 
Sir: 

Pursuant  to  a  resolution  of  the  Board  of  Estimate  and  Apportion- 
ment, adopted  February  20,  1914,  an  advisory  body  of  citizens  was 
appointed  by  you  by  letter,  dated  April  10,  1914,  requesting  them  "to 
make  a  comprehensive  and  exhaustive  study  of  the  several  methods  of 
taxation  in  use  here  and  in  other  cities  of  this  country  and  abroad,  and 
of  such  methods  and  devices  as  have  been,  or  may  be,  during  the  con- 
tinuance of  your  investigation,  suggested  as  calculated  to  effect  an  im- 
provement in  the  ways  and  means  of  creating  revenue  for  payment  of 
the  cost  of  the  city  government.'* 

The  Committee  met  and  organized,  electing  Mr.  Marling  Chairman, 
Prof.  Seligman  Chairman  of  the  Executive  Committee,  Mr.  Howe 
Secretary,  and  the  following  additional  gentlemen  as  members  of  the 
Executive  Committee :  Messrs.  Lindner,  Jenks,  Purdy,  Rumsey,  Simon 
and  Wilcox.  Mr.  Mullan  was  subsequently  added  to  the  Executive 
Committee. 

Mr.  Cromwell,  on  being  elected  State  Senator,  resigned  from  mem- 
bership in  the  Committee.  Otherwise  there  has  been  no  change  in  the 
composition  of  the  Committee. 

Various  sub-committees  were  appointed,  and  Mr.  Laurence  Arnold 
Tanzer  was  chosen  as  Executive  Secretary. 

It  was  understood  from  the  Mayor's  original  letter,  as  well  as  from 
subsequent  letters  to  the  Committee,  that  the  Committee  would  deal 
chiefly  with  t;wo  distinct  lines  of  inquiry.  The  one  was  the  question  of 
the  advisability  of  reducing  in  whole  or  in  part  the  tax  on  improvements, 
which  forms  a  part  of  the  ordinary  local  general  property  tax.  This 
involved  simply  a  proposed  change  in  the  methods  of  raising  the  exist- 
ing amount  of  public  revenue.  The  other  problem  had  to  deal  with  the 
question  of  the  best  available  method  for  an  increase  of  the  city's 
revenue. 


11 


On  the  question  of  untaxing  buildings,  various  studies  were  initiated 
immediately  on  the  organization  of  the  Committee.  One  expert,  Dr. 
Robert  Murray  Haig,  Instructor  in  Economics  in  Columbia  University, 
was  entrusted  with  the  responsible  duty  of  making  a  thorough  study  of 
the  experiments  with  the  so-called  single  tax  in  Canada  and  in  the  few 
American  cities  where  the  plan  has  been  tried. 

Dr.  Haig  spent  about  three  «HHrths  in  personally  visiting  most  of 
these  cities  and  in  ascertaining  at  first  hand  the  facts  regarding  the 
working  of  the  experiment.  The  results  of  his  investigations  were  em- 
bodied in  a  report  which  has  been  published  by  this  Committee  entitled : 
'The  Exemption  of  Improvements  from  Taxation  in  Canada  and  th« 
United  States."  This  report  contains  not  only  a  full  account  of  the 
experiments  but  also  much  information  regarding  the  conditions,  finan- 
cial, economic  and  social,  affecting  their  operation. 

Subsequently  the  Committee,  with  the  assistance  of  the  Department 
of  Taxes  and  Assessments,  collated  a  large  quantity  of  data,  taken  prin- 
cipally from  the  assessment  rolls  of  the  City  of  New  York,  bearing  on 
the  probable  effects  in  the  City  of  New  York  of  the  exemption  of  im- 
provements. Dr.  Haig  was  employed  to  study  and  analyze  this  infor- 
mation. The  results  of  these  studies  have  been  embodied  in  another 
report  published  by  this  Committee  entitled :     "Some  Probable  Effects 

of  the  Exemption  of  Improvements  from  Taxation  in  the  City  of  New 
York.*' 

After  a  year  and  a  half  of  preliminary  investigation  and  discussion, 
a  series  of  public  hearings  on  the  proposal  was  held.  A  sub-committee, 
appointed  for  that  purpose,  prepared  a  list  of  questions,  analyzing  the 
problem  in  its  various  aspects  and  submitted  them  to  a  large  number  of 
individuals  and  organizations  interested  in  the  problem  of  the  untaxing 
of  buildings.  Answers  to  these  questions  were  received  from  several 
individuals  and  organizations  and  a  number  of  briefs  were  filed  with 
the  Committee.  The  hearings  took  place  on  November  8th,  loth,  15th, 
17th,  22nd  and  24th.  About  40  advocates  and  opponents  of  the  plan  were 
heard  and  ample  opportunity  was  given  for  the  discussion  of  all  sides  of 
the  problem. 

After  the  hearings,  further  discussion  took  place  within  the  Com- 
mitte  itself  on  the  proposal,  the  result  of  which  is  stated  below.  Ap- 
pended hereto,  in  addition  to  the  conclusions  of  the  Committee  and  the 
reasons  therefor,  are  the  questions  submitted,  the  answers  and  briefs 
received  and  the  testimony  taken  at  the  hearings. 

The  question  of  new  sources  of  revenue  became  acute,  because  of 
the  financial  situation  arising  in  the  Summer  of  1914,  shortly  after  the 
Committee  was  appointed.  The  Mayor  communicated  with  the  Com- 
mittee directing  its  attention  particularly  to  this  situation,  and  asking  it 
to  make  at  the  earliest  possible  date  such  recommendations  as  might  be 
possible,  looking  toward  an  early  increase  of  the  city's  financial  resources. 

12 


The  Committee,  in  response  to  this  call,  devoted  its  time  during  the 
Winter  of  1914-1915  very  largely  to  this  problem. 

In  January,  191 5,  it  tentatively  recommended  to  the  Mayor  as  pos- 
sible means  of  raising  the  required  revenue,  an  abilities  tax,  composed  of 
a  habitation  tax,  an  occupation  tax  and  a  salaries  tax,  to  be  accompanied 
by  an  increment  tax.  These  proposals  are  substantially  the  same  as  are 
discussed  more  fully  below.  Bills  embodying  these  measures  were  pre- 
pared by  the  Committee  and  submitted  to  the  Mayor  and  are  appended 
to  this  report. 

The  attention  of  the  Committee  was  in  the  early  part  of  191 5 
especially  called  by  the  Mayor  to  proposals  then  pending  for  a  low  rate 
tax  on  intangible  or  tangible  personal  property  and  for  a  municipal 
income  tax.  The  Committee  went  further  into  studies  on  these  sub- 
jects and  called  a  number  of  experts  into  consultation.  As  a  result  of 
these  conferences,  the  Committee,  in  April,  1915,  tentatively  reported 
against  either  of  these  proposals.  Later  the  Committee  took  up  the 
question  of  a  state  income  tax.  In  this  study  it  has  enjoyed  the  valuable 
assistance  of  Professor  Thomas  S.  Adams,  of  Cornell  University. 

Throughout  its  consideration  of  this  subject,  the  Committee  has 
been  in  conference  with  other  bodies  engaged  in  the  same  study.  In 
February  and  March,  1915,  it  engaged  in  conferences  with  the  Mavor, 
the  Comptroller,  the  President  of  the  Board  of  Aldermen,  the  Chamber 
of  Commerce,  the  Merchants'  Association,  the  City  Club,  the  Allied 
Real  Estate  Interests,  the  Bureau  of  Municipal  Research,  and  other 
organizations,  to  consider  generally  the  financial  problems  before  the 
City  administration. 

At  the  191 5  session  of  the  Legislature,  a  Joint  Legislative  Commit- 
tee on  Taxation  was  appointed,  of  which  Senator  Ogden  L.  Mills  is 
Chairman.  The  Committee  on  Taxation  has  been  in  frequent  consulta- 
tation  with  the  Legislative  Committee  with  a  view  to  co-operation  in 
the  interest  of  the  city  as  well  as  of  the  State. 

Other  phases  of  the  problem  of  new  sources  of  revenue  considered 
by  the  Committee  are  referred  to  in  the  discussion  on  that  subject, 
which  follows  this  report. 

In  January,  191 5,  when  the  Committee  made  the  tentative  recom- 
mendations mentioned  above  regarding  new  sources  of  revenue,  it  also 
recommended  the  adoption  of  certain  changes  in  the  existing  tax  laws, 
which  seemed  to  it  calculated  to  simplify  and  improve  their  administra- 
tion and,  at  the  same  time,  moderately  to  increase  the  revenue.  These 
I'ecommendations  are  repeated  below,  and  are  more  fully  treated  in  a 
memorandum  on  administrative  changes  accompanying  this  report. 

In  addition  to  the  two  principal  lines  of  inquiry  mentioned  above, 
the  Committee  h^s  given  its  attention  to  a  number  of  other  topics.  The 
subject  of  excess  condethhation  has  become  one  of  special  practical 
interest  in  the  City  of  New  York,  through  the  adoption,  in  1913,  of  an 

18 


amendment  to  the  State   Constitution   legalizing  that   practice      The 

ttTrni"ct;r  ^  ""^^  °^  '''-  ^"*'' '  '  an/secuL' Srthe  Na! 
oared  for  nl?  ^  ^"*  '"  unpublished  report  on  that  subject,  pre- 
pared  for  one  of  ,ts  committees  two  or  three  years  ago  by  Herbert  S 

wi:  r'evTsedtid'h^'V'^  "^'^'^""  °'  '''  ^^'•°-'  M-l^ipa.  League! 

"ot  gen  raHv  acoer^nf '  "P  *°  ''*"  ''  ^""*^'"^  '-P-*-^  informadon 
not  generally  accessible  m  regard  to  the  use  of  excess  condemnation  in 

of  ttrv  ml  r  f "'""  "*'!f'  '"'  ^'^°  ^  '^'^*°^^  °^  *''*=  developZt 
of  the  movement  of  excess  condemnation  in  this  country.    Pending  the 

emioTerrneth   S  ""T^"'''^  *''  ^^^•^'^*"^'  '"  '^^S   passed  a^    c 
demnation.     On   May  20th.   1915,  this  Committee  transmitted  to  the 

lorT  :::r'T  ?'^  ^"'J^'^*-    ^•'•^  ^^P-*'  ^^^g^*""  -*»>  m'  swan- 
report  ment  oned  above,  the  text  of  the  New  York  City  Excess  Con- 
demnation Act.  and  photographs  and  maps  showing  the  operation  o 

h  e'of    '^Ex«t  r  T'  '"-^^^  ^^^'^^  '^^^^  ''^^  published' unierth 
on  o  'th.  rT  %  mT^*'°"'  ^  ^'P°"  °^  ^''^  Committee  on  Taxa- 
tion of  the  City  of  New  York,  With  A  Report  Prepared  by  Herbert  S 
Swan  for  the  National  Municipal  League  "  ""Dert  b. 

thattnh'e'meth^'!,''  "^  "'"'  *^  '=°'"'"'"^*  ^''  ^'^^^  consideration  is 
that  of  the  methods  of  paymg  for  public  improvements  by  assessments 

on  property  benefited.     Dr.  Haig.  in  the  course  of  his  iLesTiglTions 
mentioned  above,  secured  valuable  information  as  to  the  opera^on  oi 

ft  I  J'  J^  '"^^^  *°  ^'^'t  a  number  of  other  cities  in  ihe  United 

S  a  es  and  obtain,  at  first  hand,  information  as  to  the  actual  worWngs 

of  the  system.     The  Committee  secured  in  this  manner  and  through 

orrespondence  with  other  cities,  as  well  as  by  consultation  with  offSs 

bflrmltSn^T  ^  departments  in  the  City  of  New  York,  much  valuable 

nformation.    The  time  and  attention  required  for  the  consideration  of 

the  great  problems  with  which  the  Committee  has  principally  been  con 

cerned   and  the  desirability  of  concluding  the  Committee's  labors  at  a„ 

early  day.  have  made  it  impossible  for  the  Committee  to  carry  its  studies 

to  the  point  o   being  able  to  make  a  definite  report  on  this  subject     The 

Committee  believes  that  the  question  of  raising  additional  revenue  from 

enrrir'"""'"*!'^''"'  ""^  ^''^'  importance  and  should  be  studied  and 

m.C  T"  """^  '^l'  ""^  °'  '""*^^'"'  ^'^^^^y  gathered  by  this  Com- 
mittee  This  can.  m  the  opinion  of  the  Committee,  best  be  done  by  the 
appointment  of  a  smaller  committee  to  report  upon  this  subject 

Many  other  topics  bearing  on  the  general  subject  of  taxation  as 
at2  fnd'^''  °;New  York  have  been  brought  lo  the  CommSee 
attention  and  many  helpful  suggestions  from  various  sources  have  been 
received  by  it,  which  the  pressure  of  time  and  the  practical  requirement^ 
of  the  situation  have  made  it  impossible  to  report  upon 

The  Committee  desires  to  express  its  appreciation  of  tht  assistance 

14 


( 


given  it  in  its  investigations  by  individuals  and  organizations  so  numer- 
ous that  individual  mention  might  appear  invidious.  The  Committee 
is  under  special  obligations  to  the  Comptroller,  to  the  Register  of  the 
County  of  New  York,  to  the  Department  of  Taxes  and  Assessments  and 
to  the  Municipal  Reference  Library  for  assistance  in  securing  infor- 
mation. 

As  a  resrlt  of  its  deliberations,  the  Committee  makes  the  following 
recommendations : 

1.  The  Committee  recommends  against  the  adoption  of  the  princi- 
ple of  untaxing  buildings,  gradually  or  otherwise. 

2.  The  Committee  recommends  a  state  income  tax  as  a  partial 
means  of  securing  the  additional  revenue  required  in  the  immediate 
future. 

3.  The  Committee  recommends  that,  in  the  event  of  the  adoption 
of  a  state  income  tax  not  proving  feasible,  an  abilities  tax,  composed 
of  a  habitation  tax,  an  occupation  tax  and  a  salaries  tax  for  the  City 
of  New  York,  be  adopted  as  a  partial  means  of  securing  the  additional 
revenue  required  in  the  immediate  future. 

The  adoption  of  either  of  the  recommendations  numbered  2  and  3 
would,  in  the  opinion  of  the  Committee,  require  the  abolition  or  super- 
seding of  the  personal  property  tax  as  it  exists  at  present  as  a  part  of 
the  general  property  tax ;  a  result  which  this  Committee  would  regard 
as  in  every  way  highly  desirable. 

4.  The  Committee  recommends  against  the  adoption  of  a  low 
rate  tax  on  intangible  or  tangible  personal  property  as  a  means  of  secur- 
mg  additional  revenue  required  in  the  immediate  future. 

5.  The  Committee  recommends  the  adoption  of  the  principle  of  a 
tax  upon  the  increments  of  land  values  as  a  partial  means  of  securing 
the  additional  revenue  required  in  the  immediate  future. 

6.  The  Committee  recommends  against  a  supertax  on  land  values 
as  a  means  of  raising  the  additional  revenue  required  in  the  immediate 
future. 

^  7.  The  Committee  unanimously  recommends  the  following  changes 
m  the  existing  tax  laws  as  calculated  to  simplify  and  improve  their 
administration,  and  at  the  same  time  moderately  to  increase  the  revenue  • 
(a).  An  amendment  to  Section  4,  Subdivision  7,  of  the  Tax  Law 
by  omitting  the  words:  "or  is  in  good  faith  contemplated'^  so  thatT^ll 
property  shall  not  be  exempt  when  vacant,  though  owned  by  a  char  table 
or  other  similar  corporation.  ^-Hciruaoie 

the  Irn-  -^^  f"^^"^";^"t  to  Section   12  of  the  Tax  Law,  by  omitting 

l^cZ      ru        '^"  ^'^"''^""  "'  ^"^P^"^  ^"^  '^^  Provision  for  the  de? 
duct  on  of  the  assessed  value  instead  of  the  actual  value  of  real  estate. 

ine  the\f.trZ     r'  '^  '^'  '^""  ^"^  ^'^^^^^^"^  ^  "^^  ^^^^ion  requir- 
ing the  state  board  of  tax  commissioners  to  furnish  the  local  assessors 

15 


I 

I 


11 


I!  i 


*    ^ 


I 


throughout  that  state  with  full  particulars  concerning  the  real  property 
of  public  service  corporations  exclusive  of  their  special  francL       "^ 
th.  H.i'     The  repeal  of  Section  48  of  the  Tax  Law  which  provides  for 
the  deduction  from  a  special  franchise  tax  of  the  amount  paid  by  the 
owner  of  the  special  franchise  as  rental  for  the  franchise  anS  any  sum! 
paid  which  are  m  the  nature  of  taxes,  such  as  car  licenses,  etc 
^..    .'     ^"^^"^^"^"!^"t  to  Section  204  of  the  Tax  Law  requiring  the 
Secretary  of  State,  who  is  now  required  to  report  to  the  Stlte  Comp! 
troller  certain   details  concerning  all  certificates  of   incorporation  and 
amendments  to  such  certificates  filed  with  him,  to  send  a  duplicate  report 
to  the  assessors  of  the  town,  city  or  village  named  in  the  certificate  of 

'""^r  .T'  "'  '^"  P""'^P'^  P^"^^  °^  ^"^^"^^^  ^^  ^he  corporation. 
.«,  ^"^  additional  recommendation  adopted  by  the  Committee,  for  an 
amendment  to  Section  926  of  the  Greater  New  York  Charter,  changing 
the  date  for  sendmg  unpaid  personal  taxes  to  the  Marshal  for  collection 
from  January  to  the  preceding  August,  was  enacted  into  law  by  Chapter 
600  of  the  Laws  of  1915.)  ^ 

8.  The  Committee  unanimously  recommends  that  the  Mayor  ap- 
point a  committee  to  report  upon  the  question  of  raising  additional 
revenue  from  special  assessments  and  of  possible  improvements  in  the 
laws  relating  to  special  assessments. 

There  is  great  diversity  of  opinion  among  members  of  the  Com- 
mittee  with  respect  to  most  of  the  foregoing  recommendations.  Whil^ 
each  of  them  represents  the  views  of  a  substantial  majority  of  the  Com- 
mittee,  those  favoring  one  recommendation  were,  in  several  cases,  not 
those  voting  in  favor  of  another.  The  recommendations  adopted  by  the 
Committee  are,  therefore,  set  forth  above  without  discussion.  Appended 
hereto  is  a  separate  statement  with  respect  to  each  recommendation 
requiring  any  further  discussion,  signed  by  the  majority  favoring  it 
stating  their  reasons  therefor,  followed  by  a  statement  of  the  views  of 
those  members  of  the  Committee  who  dissent  or  who  concur  only  ia 
part  or  with  qualifications. 

Respectfully  submitted, 

ALFRED  E.  MARLING, 

Chairman. 


16 


STATEMENTS  ACCOMPANYING  REPORT. 

PART  ONE. 

UNTAXING  OF  BUILDINGS. 

Majority  Report. 

Your  Committee  believe  that  it  would  conduce  to  a  clearer  under- 
standing of  the  problem  if  the  arguments  on  both  sides  were  presented 
in  summary.  If  we  characterize  those  who  advocate  the  plan  of  un- 
taxing of  buildings  as  the  affirmative,  and  those  who  are  opposed  to  the 
untaxing  of  buildings  as  the  negative,  it  may  be  convenient  to  discuss 
the  arguments  under  four  heads : 

I.  The  alleged  advantages  of  the  scheme  as  advanced  by  the 
affirmative ; 

II.  A  rebuttal  of  these  arguments  by  the  negative; 

III.  The  alleged  disadvantages  of  the  scheme,  as  propounded  by 
the  negative; 

IV.  A  rebuttal  of  these  arguments  by  the  affirmative. 

I.     THE  ALLEGED  ADVANTAGES  OF  THE  SCHEME  AS  ADVANCED 

BY  THE  AFFIRMATIVE. 

The  advocates  of  the  scheme  for  the  untaxing  of  buildings  who 
appeared  before  the  Committee  may  be  divided  into  three  classes:  (i). 
The  out-and-out  single  taxers  who  espouse  the  views  of  Henry  George, 
and  who  consider  private  property  in  land  to  be  an  anachronism;  (2). 
The  social  reformers  who  allege  that  taxation  must  be  used  primarily, 
or  even  incidentally,  for  social  purposes,  and  who  think  that  great 
social  benefits  would  accrue  from  the  change;  (3).  Those  who,  while 
not  single  taxers,  believe  that  largely  for  fiscal  reasons  alone,  there  is 
some  warrant  for  considering  the  propriety  of  the  untaxing  of  buildings. 
Of  the  arguments  herewith  submitted,  some  would  appeal  to  one  of 
these  three  classes,  and  some  to  another.  The  arguments  themselves 
have  been  urged  with  insistence  before  your  Committee.  They  may  be 
summed  up  under  seven  heads : 

(I).  Land  is  something  entirely  different  from  the  products  of  labor. 
Land  is  a  gift  of  nature ;  ordinary  commodities  are  the  product  of  human 
energy.  Land  values  are  entirely  the  creation  of  the  community  all 
other  values  are  labor  values.  Since  land  value  is  a  social  product  or  a 
community  product,  land  rents  should  go  to  the  community,  or.  at  all 
events,  all  taxes  should  be  derived,  in  the  first  place,  from  land  Houses 
being  products  of  labor  should,  therefore,  be  exempted  from  taxation' 
This  exemption  of  houses  from  taxation  will  lead  to  an  increased  pro^ 

17 


/  - 


.i 


I 


duction  of  buildings,  and  this  increased  production  of  buildings  will  tend 
to  increase  wages  and  to  diminish  unemployment. 

,  i^m'  .^""u  •!!•  ^''*"*'*"y  ^  monopoly,  since  the  supply  of  land 
available  for  building  cannot  be  increased.  Buildings,  like  all  other 
produc  s  of  labor,  are  subject  to  the  influence  of  competition,  and  their 
value,  therefore,  will  be  limited  to  the  cost  of  production.  Since  land 
IS  a  monopoly,  its  price,  like  that  of  all  monopolies,  ought  to  be  con- 
trolled by  the  government;  and  the  best  method  of  such  control  is 
through  the  agency  of  taxation.  Buildings,  being  subject  to  the  ordinary 
competitive  law,  do  not  need  this  control.  Therefore,  buildings  should 
be  exempted  from  taxation,  while  land  alone  should  bear  the  burden 
•  XT  V'T ^"^  monopoly  of  land,  both  of  acreage  and  of  land  value, 
m  New  York  City,  make  the  proposed  change  especially  just  and  appro- 
priate. There  are,  in  New  York,  one  hundred  families  who  were  the 
owners  of  record  of  land,  assessed  in  19.5  for  $473,808,075,  approxi- 
mately one-ninth  of  the  total  assessed  value  of  land  in  the  city     The 

T.T^VT^  °*  *u'''  ™P™^^'n<>nts  was  only  $157,515,235.  or  less 
than  a  third  as  much,  while  the  value  of  the  building  of  a  small  home 
owner  is  usually  about  three  times  as  much  as  the  value  of  his  site 

It  IS  estimated  that  eight  hundred  families  are  the  owners  of  record 
of  land  assessed  for  about  eight  hundred  millions,  between  one-fifth 
and  one-sixth  of  the  total  assessed  value  of  land  ;  and  that  less  than  three 
thousand  families  own,  directly  or  through  real  estate  corporations 
which  they  control,  approximately  two-fifths  of  the  assessed  value  of 
land  m  the  city.  Assuming  even  eight  persons  to  a  family,  twenty-four 
thousand  people,  out  of  a  population  of  five  million  three  hundred 
thousand,  own  about  two-fifths  of  the  total  assessed  value  of  land  in 
the  city. 

Most  of  these  famih'es  acquired  their  land  years  ago  for  a  small 
part  of  the  present  selling  price.  Almost  every  wealthy  family  in  the 
city  owning  a  mansion  would  pay  more  taxes  under  the  proposed  change. 
The  Astor  family  alone  are  the  owners  of  record  of  land  assessed  for 
nearly  as  much  as  the  total  land  owned  by  nearly  all  of  the  smaller 
home  owners  of  the  city.  Several  families  or  corporations  own  from 
one  hundred  to  several  thousand  lots  in  the  outlying  boroughs,  which 
they  are  holding  for  high  prices. 

(3).  Land  speculation  is  one  of  the  great  evils  of  modern  city  life. 
People  who  buy  land  in  order  to  keep  it  out  of  use  until  some  future 
time  when  its  value  should  be  considerably  enhanced  are  the  real  ene- 
mies of  society.  Their  profits  are  exorbitant.  They  take  for  themselves 
what  really  belongs  to  the  public,  with  the  result  of  giving  to  our  Amer- 
ican cities  that  straggling  appearance  which  is  the  despair  of  the  re- 
former. Land  speculation  results  in  large  tracts  of  land  held  out  of  use, 
and  is  one  of  the  chief  causes  of  high  rents,  and  one  of  the  chief  reasons 
for  the  need  of  exorbitant  sums  for  supplying  rapid  transit  facilities. 

18 


Moreover,  in  the  City  of  New  York,  the  normal  annual  increase  of  land 
values  is  very  great.  During  the  past  decade,  for  instance,  land  values 
have  increased  by  over  a  thousand  million  dollars,  while  business  in  gen- 
eral is  very  poor.  It  is  only  fair  that  the  chief  beneficiaries  of  our  econo- 
mic system  should  be  compelled  to  suffer  the  burden. 

Increases  in  the  selling  price  of  land  are  a  waste  in  the  cost  of  pro- 
duction, irrespective  of  whether  one  land  speculator  loses  what  another 
gains,  or  whether  it  is  a  net  clear  acquisition  of  any  one  land  speculator. 
The  average  annual  increase  in  the  selling  price  of  land  in  New  York 
has  been  for  the  last  decade  about  $125,000,000.  The  total  increase  for 
the  decade  has  been  about  $1,250,000,000.  Calculating  interest  at  five 
per  cent.,  and  net  ground  rent  also  at  five  per  cent.,  this  means  an  annual 
charge  of  $125,000,000  on  a  decade's  increase  in  land  values,  to  be  paid 
by  manufacturers,  business  men  in  general,  tenants  and  home  owners. 
This  constitutes  a  dead  weight  fixed  charge  upon  the  workers  of  the  city, 
of  no  use  to  any  one  except  land  speculators. 

Gradually  transferring  taxes  from  buildings  to  land  values,  during 
a  period  of  ten  years,  would  prevent  most  of  the  speculative  increase  in 
the  selling  price  of  land,  and  would  save  the  community  this  fixed  but 
wasteful  charge,  which  tends  to  increase  the  cost  of  living  and  interest 
rates,  and  to  keep  land  out  of  use  longer,  thus  restricting  employment 

Speculation  in  land  diflFers  from  speculation  on  the  stock  market 
Speculation  in  land  lays  a  burden  in  perpetuity  upon  the  city ;  specula- 
tion on  the  Stock  Exchange  is  a  game  in  which  only  gamblers  lose 
or  gain.  Those  who  complain  of  their  heavy  burdens  on  real  estate  ig- 
nore the  fact  that,  while  in  1880  real  estate  paid  87  per  cent,  of  the  taxes 
for  the  city,  in  1913   real  estate  paid  only  75  per  cent. 

(4).    The  untaxing  of  buildings  will  lead  to  the  lowering  of  rents 
More  houses  will  be  built,  and  the  competition  of  these  houses  will  bring 
down  rents,  not  only  in  the  outskirts,  where  the  new  houses  are  built 
but  in  the  city  s  slums  and  centers.     These  lower  rents  will  apply  not 
only  to   the  tenants  of  residential  apartments  but  to  the   tenants  of 

due  to  the  lower  rent.  In  the  case  of  tenements,  the  lower  rents  wil 
mean  an  increased  surplus  to  be  divided  for  general  purposes,  which  wiU 
tend  to  increase  wages  and  to  lessen  unemployment.  In  the  case  of 
lower  rents  for  business  purposes,  it  will  make'^New  York  Citrmore 
attractive  to  industrial  ventures,  and  will,  to  the  extent  of  less  ninTol 
taxes,  increase  the  funds  available  for  the  payment  of  waees  or  th.  in 
vestment  of  capital,  and  thus  contribute  to^'eneral  p^pShy     ^'^  "" 

the  Si  or^::T::\^^^^^^^^  r  "^'  r  ^^^^^^  ^^-^^^^^^^  - 

J        i>icw   lorK,  eitner  by  the  lowering  of  rents  or  bv  urn^riAir.*, 

19 


r^ 


i  } 


;.(i     ■ 


losis ;  It  will  better  the  physique  and  the  morals  of  the  whole  population 
(6).  The  untaxing  of  buildings  will  lessen  the  tendency  that  is  now 
seen  in  New  York  to  the  erection  of  tenement  houses  and  fiats.  It  will 
make  it  more  profitable,  and  therefore  more  attractive,  to  intending 
owners  of  small  homes  in  the  suburbs  to  build  their  own  homes,  and 
will  thus  help  to  prevent  the  repetition  in  the  outskirts  of  the  city  of  the 
slum  conditions  in  the  center. 

The  change  would  save  the  smaller  home  owner  of  the  city  about 
if50  a  year  taxes  on  the  average,  and  would  only  retard  the  rate  of  in- 
crease in  the  selling  price  of  his  land. 

(7).  Finally,  apart  from  any  of  the  above  considerations,  buildings 
ought  to  be  exempted  from  taxation  because  the  financial  benefits  of 
city  expenditure  accrue  exclusively  to  the  land  owner.  The  building  of 
a  school  house  increases  the  value  of  the  adjoining  lands.  The  construe 
tion  of  a  new  subway  creates  or  augments  land  values.  Everything  that 
IS  spent  by  the  city  ultimately  accrues  to  the  advantage  of  the  land 
owner,  and  if  there  are  any  advantages  at  all  that  come  from  city  ex- 
penditures  to  other  members  of  the  community,  they  have  to  pay  for 
hese  advantages  in  the  increased  rent  that  they  give  to  the  owners  of 
the  real  estate.  For  these  reasons  buildings  should  be  exempted  from 
taxation.  ^ 

II.     REBUTTAL  OF  THESE  ARGUMENTS  BY  THE   NEGATIVE 
On  every  one  of  these  points  opposing  arguments  are  advanced,  and 
either  the  benefits  are  alleged  to  be  chimerical  or  the  arguments  are 
declared  to  be  inconclusive.     Let  us  take  them  up  in  order : 

(I).  As  a  general  philosophy  of  economics  and  social  life  it  is 
denied  that  land  is  so  entirely  diflFerent  from  other  kinds  of  wealth  It 
IS  true  that  land  is  a  gift  of  Nature;  but  it  is  also  true  that  a  great  part 
of  the  so-called  products  of  labor  are  also  gifts  of  Nature.  The  wood 
that  goes  into  a  table,  the  wool  that  goes  into  a  suit,  and  the  pearl  that 
goes  into  a  necklace,  are  all  gifts  of  Nature.  Furthermore,  it  is  denied 
that  we  can,  at  all  consistently,  distinguish  between  land  values  as  com- 
munity-made values,  and  other  values  as  man-made  values.  What  gives 
value  to  everything  is  demand.  Without  demand  no  labor  product 
would  have  any  value  whatever.  If  people  spend  their  time  in  making 
things  for  which  there  is  no  demand,  those  things  will  have  no  value 
The  demand  is  as  important  and  insistent  in  the  case  of  labor  values  as 
It  IS  in  the  case  of  land  values.  Again,  in  reply  to  the  contention  that 
values  depend  upon  the  relation  between  demand  and  supply,  it  is  an 
error  to  state  that  the  supply  of  land  cannot  be  increased  while  the 
supply  of  other  things  can  be  increased.  To  all  intents  and  purposes  the 
supply  of  land  can  be  increased.  Assuming  that  there  is  suflFicient  de- 
mand, land  will  be  taken  from  the  outskirts,  and  turned  into  building 
sites.     Finally,  and  above  all,  value  in  modern  life  comes  not  so  much 

20 


from, the  application  of  labor  as  from  all  sorts  of  relations  and  privileges. 
These  speculative  relations  and  actual  privileges  enter  so  importantly 
into  all  forms  of  modern  income  that  it  would  be  illegitimate  to  draw  so 
hard  and  fast  a  line  between  land  and  other  things. 

(2).  Land  monopoly  exists  only  in  the  imagination  of  the  affirma- 
tive. As  a  matter  of  fact,  land  in  the  City  of  New  York  is  not  held  out 
of  use  for  any  appreciable  length  of  time.  The  vacant  parcels  in  the 
Borough  of  Manhattan,  for  instance,  apart  from  those  used  for  coal  or 
wood  yards,  and  so  forth,  are  so  insignificant  as  to  be  entirely  inappre- 
ciable. As  a  matter  of  fact,  any  attempt  to  hold  land  out  of  use  would, 
under  existing  conditions  of  taxation  in  New  York,  be  a  losing  venture. 
It  is  not  denied  that  under  other  conditions  vacant  land  is  not  assessed 
at  all,  or  assessed  at  only  a  fraction  of  its  value,  and  where  the  system 
of  special  assessments  is  not  in  vogue,  this  might  become  a  serious 
problem.  Even  then  the  proper  solution  of  the  difficulty  is  by  levying 
a  special  tax  on  vacant  land.  In  the  City  of  New  York,  however,  such 
conditions  are  practically  non-existent,  as  land  is  brought  into  use  just 
as  soon  as  it  will  pay  the  land  owner  to  put  up  a  building  thereon.  To 
speak  of  land  monopoly  is  a  great  mistake.  Moreover,  it  must  be  re- 
membered that  in  the  City  of  New  York  land,  as  a  rule,  changes  hands 
frequently.  In  the  City  of  Chicago  it  was  shown  by  a  recent  investiga- 
tion that  each  parcel  of  land  changed  hands  on  an  average  every  twenty- 
seven  years.  There  is  no  reason  to  believe  that  the  average  is  far  diflFer- 
ent in  New  York  City.  It  is  true  that  there  are  some  large  holdings  of 
land  by  individuals,  but  the  fortunes  of  even  these  large  land-owners  arc 
insignificant  to-day  as  compared  with  the  fortunes  of  our  capitalists, 
financiers,  and  captains  of  industry.  While  no  careful  statistical  investi- 
gation has  been  made,  it  is  fairly  demonstrable  that  there  are  about 
200,000  individual  land  owners  in  New  York  City.  On  the  genera!  as- 
sumption that  the  head  of  the  family  represents  his  wife  and  three 
children,  and  on  the  further  assumption  that  the  great  majority  of  land- 
owners are  married  men,  there  would  be  one  million  people  directly  or 
indirectly  owning  land.  Moreover,  it  was  brought  out  in  the  testimony 
that  by  far  the  greater  part  of  New  York  City  lands  is  mortgaged,  and 
that  the  quantity  of  real  estate  owned  free  and  clear  is  exceedingly  small. 
Since,  therefore,  the  equity  is  slight,  the  owners  of  the  mortgages  are, 
to  all  intents  and  purposes,  part  owners  of  the  land.  Real  estate  mort- 
gages in  the  City  of  New  York  are  held  to  an  overwhelming  extent  by 
savings  banks,  life  insurance  companies,  and  similar  institutions,  so  that 
the  real  owners  of  the  greater  part  of  New  York  real  estate  are  the 
depositors  in  savings  banks  and  the  policy-holders  of  the  insurance  com- 
panies. To  speak  of  land  monopoly  in  such  a  case,  it  is  contended,  is 
absurd. 

(3).  Speculation  in  land  is  not  the  bugaboo  that  has  been  made  of 
It.    Speculation  in  land  is  not  essentially  diflFerent  from  speculation  on 

81 


i' 


'  ■!       1.^ 


t       H\ 


the  Stock  or  the  Produce  Exchange.    It  is  not  denied  that  abuses  exist 
in  the  one  case  as  in  the  other ;  but,  as  every  careful  thinker  knows,  specu- 
lation is  an  essential  element  in  all  modern  business  enterprises.   With- 
out speculation,  there  would  be  far  greater  fluctuations  in  the  prices  of 
ordinary  commodities.    The  speculative  expert  is  the  one  who  takes  the 
risk  for  the  community.     The  speculator  in  land  is,  therefore,  just  as 
legitimate  and  as  necessary  as  the  speculator  in  anything  else.     More- 
over, two  great  misapprehensions  should  be  removed.     The  first  is  the 
idea    that    land    speculators,    as    a  class,    or    land    owners    as  a    class, 
whether  they  speculate  or  not,  make  any  more  money  than  any  other 
members  of  the  community.     We  are  often  presented  with  the  picture 
of  the  man  who  invests  a  certain  sum  in  land  and  then  travels  and  leaves 
the  land  alone  for  years  or  for  decades,  in  order,  finally,  to  reap  the  im- 
mense increment  in  its  value,  a  value  which,  we  are  told,  is  produced 
by  the  community.     As  a  matter  of  fact,  if  the  same  man,  instead  of 
putting  his  $10,000  into  a  piece  of  vacant  land,  had  put  it  into  the  bank 
and  allowed  it  to  increase  at  compound  interest,  he  would   find  that, 
at  the  end  of  a  term  of  years,  he  would  be  better  oflF  than  if  he  had  in- 
vested the  same  amount  of  money  in  a  piece  of  vacant  land  subject  to 
increasing  taxation  and  to  all  kinds  of  special  assessments.     The  large 
profits  of  land  owners  and  land  dealers  are  fanciful.     As  a  class,  they 
do  not  earn  any  more  than  any  other  class  in  the  community.     During 
the  past  few  years,  in  New  York  City,  at  least,  they  have  earned  far 
less  than  the  other  classes  of  the  community.     Speculative  profits   in 
land  in  New  York  City,  as  a  social  danger,  are  a  myth. 

The  other  misapprehension  comes  from  a  failure  to  understand  the 
real  function  of  the  owner  of  real  estate.  In  thp  City  of  New  York,  as 
in  most  American  cities,  the  same  man  who  owns  land  owns  the  building. 
Investments  in  real  estate,  therefore,  constitute  one  of  the  productive 
industries  of  the  United  States,  and,  in  many  respects,  the  most  im- 
portant productive  industry.  In  lieu  of  being  a  menace  to,  or  a  drag  on, 
the  community,  the  land  owner— the  land  speculator,  in  the  better  sense 
of  the  term— is  really  one  of  the  indispensable  classes  in  the  community. 
We  must  be  careful  to  distinguish  between  the  use  and  the  abuse  of  a 
system.  The  Stock  Exchange  may  have  its  abuses,  but  no  sensible  man 
would  desire  to  do  away  with  the  Stock  Exchange. 

In  answer  to  the  contention  that  land  values  have  increased  during 
the  past  decade  disproportionately  to  everything  else,  two  points  are 
made.  In  the  first  place,  a  large  part  of  the  so-called  increase  of  land 
values  is  due  to  the  arbitrary  raising  of  assessed  valuations  which  was 
resorted  to  during  the  years  1910-1911,  in  order  to  make  possible  a 
broader  basis  for  addition  to  the  city  debt,  required  primarily  by  the 
new  expenditure  for  subway  construction  and  by  other  permanent  im- 
provements. 

22 


In  the  second  place,  it  must  be  remembered  that  in  not  a  few  sec- 
tions of  the  city  the  nominal  increase  in  the  value  of  the  land  which 
has  been  normally  improved  is  due  to  improvements  on  the  adjoining 
land,  such  as  the  Woolworth  and  other  skyscrapers.  In  reality,  the 
owner  of  the  adjoining  property  which  is  already  covered  by  the  normal 
improvement,  instead  of  enjoying  a  benefit  from  this  ostensible  increase 
in  valuation  suffers  a  detriment,  and  this  detriment  will  continue,  at  all 
events,  up  to  the  time  when  the  actual  value  of  the  land  increases  to 
such  a  point,  making  allowance  for  a  proper  amortization  of  the  build- 
ings, as  to  make  it  profitable  to  destroy  the  existing  improvement. 
Finally,  it  must  be  remembered  that  a  not  inconsiderable  part  of  the 
ostensible  increase  in  land  values  has  been  offset  by  the  accumulated 
taxes  and  by  the  payment  of  special  assessments  of  all  kinds  that  may 
have  been  levied  upon  the  lands.  It  not  infrequently  happens  that  the 
burden  suflfered  by  special  assessments  is  in  itself  made  the  basis  for 
an  increased  valuation,  and,  therefore,  an  increased  payment  of  taxes 
to  the  city.  .  - 

Finally,  the  claim  that  in  1880  real  estate  paid  87  per  cent,  of  the 
taxes  for  the  city,  while  in  1913  real  estate  paid  only  75  per  cent.,  is 
specious.  What  has  happened,  as  a  matter  of  fact,  is  that  a  number  of 
taxes  have  been  added  to  the  general  property  tax,  thus  reducing  the 
proportion  paid  not  only  by  real  estate  but  by  all  property  in  general 
under  the  general  property  tax.  As  a  matter  of  fact,  in  1913,  real  estate 
paid  a  much  larger  percentage  of  the  general  property  tax  than  it  did 
in  1880,  and  entirely  apart  from  percentages  the  actual  burden  of  real 
estate  has  increased  enormously.  Not  only  have  the  tax  rates  themselves 
increased  very  greatly,  but  assessed  valuations  have  been  raised  from  60 
per  cent,  or  70  per  cent,  to  100  per  cent.,  so  that  there  can  be  no  ques- 
tion about  the  very  much  greater  burden  upon  real  estate  at  present  as 
compared  with  that  of  a  generation  ago. 

(4).  In  answer  to  the  contention  that  rents  will  be  lowered  as  the 
result  of  the  untaxing  of  buildings,  it  is  pointed  out  that  while  it  is  true 
that  the  incidence  of  a  tax  on  buildings  is  diflFerent  from  the  incidence 
of  a  tax  on  land,  it  does  not  follow  that  in  actual  life  rents  would  really 
be  lowered.  Entirely  apart  from  the  argument  to  which  attention  will 
be  directed  below,  showing  that  there  would  be  countervailing  forces 
tending  to  more  than  over-balance  the  influence  of  the  remission  of 
taxes,  it  is  argued  that  in  actual  life  we  must  consider  the  influence  of 
friction.  In  many  portions  of  New  York  City,  for  instance,  it  has  been 
pointed  out  that  the  rate  of  taxation  has  been  going  up  for  the  past  five 
or  ten  years,  but  that  there  has  been  in  those  quarters  no  increase  of 
rent.  If  an  increase  of  taxation  has  so  slight  an  influence  on  the  rent, 
why  should  a  remission  of  taxation  have  any  greater  influence?  Far 
more  important  than  any  change  in  the  rate  of  taxation  are  the  other 
economic  factors  involved,  such  as  general  conditions  of  industry,  rapid 

23 


I 


1     i 

1l 


I 


^'  il 


:  .» 


1 


f  I 


transit,  et  cetera.  Even  if  it  be  conceded  that,  in  the  long  run,  lower 
taxes  on  houses  might  lead  to  lower  rents,  the  results  would  be  slow  in 
showing  themselves,  and  the  changes  would  be  far  less  than  are 
imagined.  Again,  it  must  be  remembered  that  there  are  countervailing 
influences  at  work  in  preventing  a  decrease  of  rents.  One  of  the  most 
important  facts  here  is  that  house  owners  in  New  York  City  count  upon 
a  future  normal  appreciation  of  land  values  to  make  good  the  inevitable 
deterioration  in  the  value  of  the  building;  in  other  words,  the  expected 
growth  in  land  values  takes  the  place  of  a  deterioration  fund  or  amortiza- 
tion fund  for  the  house.  If,  now,  by  a  change  m  the  methods  of  taxation 
this  virtual  amortization  fund  disappears,  it  will  be  necessary  to  put  into 
operation  an  actual  amortization  fund.  This,  however,  will  pro  tanto 
mcrease  the  carrying  charges  of  the  building  and  will  tend  to  augment 
rather  than  reduce  the  cost.  So  far  as  this  point  is  concerned,  therefore, 
the  tendency  of  rents  would  be  to  increase  rather  than  to  decrease. 

Moreover,  the  benefits,  so  far  as  the  question  of  wages  and  employ- 
ment are  concerned,  are  entirely  exaggerated.  Wages  and  rents  move 
along  together.  It  is  absurd  to  claim  that  since  all  wealth  is  divided 
into  rent,  wages  and  interest,  if  more  goes  to  the  payment  of  rent  less 
will  be  available  for  wages  and  interest.  This  may  be  true  of  a  hypo- 
thetical static  condition ;  that  is.  where  there  is  a  given  sum  to  be  divided  • 
but  It  is  not  true  of  actual  life,  which  is  a  dynamic  condition  and  which 
continually  changes.  If  rents  rise  because  of  greater  population  and 
greater  prosperity,  it  is  just  as  likely  that  wages  will  rise  at  the  same 
time,  because  of  the  greater  prosperity  and  the  greater  demand  for  the 
products  of  industry.  The  only  correlation  between  rents  and  wages  that 
IS  at  all  sure  is  that  if  rents  go  up,  wages  must  go  up  also.  The  scale 
of  wages  and  professional  earnings  is  far  higher  in  the  City  of  New 
York  than  in  the  small  neighboring  towns,  and  the  diflFerence  is  very 
largely  measured  by  the  diflFerence  in  house  rents.  If,  therefore,  rents 
were  to  fall  in  New  York  as  the  result  of  the  untaxing  of  buildings,  it  is 
probable  that  wages  would  also  fall.  The  untaxing  of  buildings  would, 
therefore,  not  benefit  wages. 

Again,  there  is  no  truth  in  the  contention  that  the  untaxing  of  build- 
ings will  lead  to  greater  employment.  It  may  be  true,  it  is  conceded,  that 
the  immediate  result  of  the  untaxing  of  buildings  might  lead  to  an  over- 
building of  the  city ;  but  as  soon  as  the  first  impetus  had  spent  itself  after 
a  year  or  two,  and  a  nev^r  equilibrium  had  been  reached,  there  would  be 
only  the  normal  increase  in  building  due  to  the  normal  increase  in  popu- 
lation, which  would  come  with  or  without  the  change  in  building  opera- 
tions. There  would,  therefore,  be  no  continuous  tendency  to  more 
employment. 

Moreover,  there  is  a  fallacy  in  the  argument  that  the  savings  of 
the  merchant  and  manufacturer  in  his  store  or  factory,  assuming  that 
rents  would  fall,  would  lead  to  more  employment.     The  surplus,  it  is 

24: 


true,  would  now  go  into  the  hands  of  the  merchant  or  manufacturer 
instead  of  into  the  hands  of  the  land  owner ;  but  in  the  one  case,  as  in 
the  other,  the  surplus  would  either  be  spent  unproductively  in  riotous 
living,  which  would  give  little  or  no  employment  to  labor,  or  it  would  be 
turned  into  the  bank  and  then  invested  in  some  productive  enterprise.  For 
the  purposes  of  the  community,  it  is  immaterial  whether  this  capital  is 
productively  employed  through  the  medium  of  the  land  owner,  or  through 
the  medium  of  the  merchant  or  manufacturer.  In  every  case  it  is  an 
addition  to  social  capital. 

Thus,  it  is  a  gross  economic  fallacy  to  argue  that  the  untaxing  of 
buildings  would  be  of  any  benefit  to  the  laborer  in  the  way  of  greater 
employment.  It  is  the  old  fallacy  of  Henry  George,  which  has  not 
been  accepted  by  any  modern  economist  of  repute. 

(5).  With  reference  to  the  argument  as  to  congestion,  it  is  replied 
that  the  affirmative  regards  only  one  kind  of  congestion,  the  conges- 
tion of  population  per  room.  The  other  kind  of  congestion  is  the  con- 
gestion  of  population  per  acre.  Whatever  good  results  might  ensue 
from  diminishing  congestion  of  the  first  kind  would  be  more  than  out- 
weighed by  the  congestion  of  the  second  kind.  It  is  indubitable,  for 
instance,  that  the  untaxing  of  buildings  will  lead  to  a  more  intensive  use 
of  the  land,  simply  because  it  will  pay  better  to  economize  in  the  use 
of  the  land.  The  results  will  be,  without  any  doubt,  that  all  vacant  land, 
so  far  as  there  is  any,  will  tend  to  be  covered  with  buildings,  and  that 
there  will  also  be  a  tendency  to  replace  all  low  two-  or  three-story 
structures  by  skyscrapers  in  tthe  business  districts,  and  by  lofty  tene- 
ments in  the  slums.  In  so  far  as  this  will  lead  to  the  destruction  of 
some  of  the  poor  and  outworn  tenements,  it  may  be  conceded  that  this 
is  a  good  thing.  But  the  benefits  of  this  are  far  more  than  overbalanced 
by  the  conversion  of  whole  sections  of  comparatively  low  buildings  into 
sections  of  high  and  densely-populated  structures.  The  congestion  per 
acre  would  be  enormously  increased  and  all  the  dangers  to  life  and 
safety  which  would  be  removed  in  one  way  would  be  reintroduced  in 
another. 

The  affirmative  argues  that  all  this  might  be  prevented  by  proper 
laws  limiting  the  height  of  buildings  and  by  proper  zoning  systems. 
The  attempt,  however,  to  carry  out  this  scheme,  if  made  at  all,  ought  to 
be  made  after  and  not  before  these  laws  are  passed.  To  permit  the 
untaxing  of  buildings  now  and  to  hope  that  the  other  laws  will  come 
subsequently  is  a  very  naive  argument.  We  must  consider  the  propo- 
sition  on  Its  merits.  If  it  is  true  that  the  untaxing  of  buildings  will  of 
Itself  increase  congestion  of  the  second  kind,  the  argument  of  the  affirm- 
ative is  pro  tanto  weakened. 

(6).  The  alleged  advantage  to  the  small  householder  is  largely 
Illusory.  Almost  all  improvements  in  New  York  City  are  made  through 
mortgage  loans.    The  decrease  in  the  capital  value  of  land,  due  to  the 

?5 


' 


mcreased  rate  of  taxation  on  land,  will  so  impair  the  security  for  loans 
that  either  the  rate  of  interest  will  rise  or  a  smaller  percentage  of  the 
capital  will  be  loaned  at  the  same  rate  of  interest,  since  it  is  customary  in 
his  cty  to  increase  the  rate  of  interest  on  loans  with  the  proportion  of 
the  loan  to  the  real  value  of  the  property.  I„  either  case,  there  will  be 
an  increased  expense  to  the  intending  home-builder,  which  will  tend  to 
offset  whatever  advantage  might  accrue  to  him  from  the  decrease  in 

In  the  second  place,  the  point  is  made  that  just  as  in  the  country 
at  large  It  is  the  expected  increment  in  land  values  which  was  chiefly 
responsible  for  the  settlement  of  the  West  by  individual  farmers,  who 
sold  out  and  moved  on  whenever  the  value  of  their  farms  reached  a 
certain  figure,  so  it  is  the  anticipated  increase  in  the  value  of  the  land 
that  forms  the  greatest  inducement  to  intending  home-builders.     When 
a  man  builds  a  house  of  his  own  and  borrows  most  of  the  capital  neces- 
sary   he  hopes  that,  while  in  the  course  of  time  the  value  of  the  house 
will  depreciate,  the  value  of  the  land  will  appreciate  to  a  much  greater 
extent,  so  that  when  land  values  have  gone  up  to  a  certain  point,  he 
can  then  sell  out  and,  by  reason  of  his  profits  on  the  land   transaction, 
pay  off  his  mortgage  and  come  out  clear.     Even  if,  as  a  matter  of  fact 
many  small  home  owners  do   not  sell  out  under  these  conditions    it 
remams  none  the  less  true  that  the  knowledge  that  the  capital  value  of 
their  mvestment  has  risen  prompts  them  to  bear  with  greater  ease  and 
equanimity  the  annual  burden  of  the  mortgage  debt.     If,  now   we  take 
away  from  the  intending  house-builder  this  expectation  of  being  able 
ultimately  to  finance  his  building  operations  without  difficulty,  we  mani- 
festly decrease  the  inducement  to  build. 

Combining  these  two  points,  the  increased  interest  rate  and  the 
removal  of  the  anticipated  increase  in  land  value,  we  have  a  very  decided 
obstacle  to  building  small  homes.  This  obstacle  will  more  than  outweigh 
the  advantage  both  of  the  remission  of  taxes  and  of  the  decrease  in  the 
cost  of  the  land.  The  net  result  of  all  these  factors  will  be  the  decrease 
and  not  the  increase  in  the  inducement  to  build  small  homes. 

(7).  Finally,  the  argument  that  the  benefits  of  city  expenditure 
accrue  exclusively  to  the  land  owner  is  completely  false.  Most  of  the 
city  expenditures  redound  to  the  benefit  of  the  community  as  a  whole 
The  expenditures  for  fire  protection  redound  to  the  benefit  of  people 
who  own  houses  and  to  people  who  live  in  structures ;  the  benefit  of  the 
police  IS  to  protect  every  property  owner,  whether  his  property  con- 
sists  m  land  or  in  personal  property,  from  theft,  and  to  protect  every 
individual,  whether  he  owns  any  property  or  not,  from  violation  •  the 
benefit  of  the  courts  is  to  dispense  even  justice  between  individuals 
whether  or  not  they  are  land  owners ;  the  benefit  of  the  school  system  is 
to  give  advantages  primarily  to  the  children  of  the  poor ;  the  benefit  of 
the  city  departments  of  Charities  and  Corrections  goes  to  the  weak  and 

26 


the  suflfering;  the  benefit  of  the  city  hospitals  accrues  to  every  one. 
whether  or  not  he  owns  land ;  the  benefit  of  the  subways  goes  to  every 
one  who  uses  the  subways,  and  especially  in  the  case  of  the  large  mass 
of  wage-earners  increases  opportunities  for  work.  In  short,  even  from 
the  narrow  point  of  view  of  monetary  compensation,  it  may  be  said  that 
the  expenditures  of  a  great  metropolis  like  New  York  result  in  increased 
opportunities  for  gain.  Laborers,  merchants  and  manufacturers  would 
not  flock  to  New  York  unless  they  made  more  money  here  than  they 
would  elsewhere. 

It  is  not  denied,  of  course,  that  with  increasing  prosperity  there 
comes  an  increase  of  land  values.  But  it  is  denied  that  the  land  owners 
are  the  only  beneficiaries.  It  is  true,  indeed,  that  the  value  of  prop- 
erty does  not  normally  increase  as  land  values  do,  but  it  should  not  be 
forgotten  that  the  opportunities  for  increased  income  grow  in  about  the 
same  proportion  as  the  increase  in  land  values.  The  greater  the  city, 
the  higher  the  wages ;  the  greater  the  city,  the  higher  the  profits  of  the 
merchants  and  manufacturers,  and  the  greater  the  income  of  the  salaried 
and  professional  classes.  It  is  contended  by  the  affirmative  that  even 
though  some  benefits  accrue  to  the  public  at  large,  these  benefits  are 
swallowed  up  in  the  higher  rentals  paid  to  the  land  owners.  To  this 
there  is  a  double  answer :  First,  it  is  not  true  that  the  benefits  to  the 
community  are  swallowed  up  in  higher  rents.  Rents  indeed  are  higher, 
but  unless  there  was  a  growing  surplus  or  margin  over  and  above  these 
higher  rents,  there  would  be  no  inducement  for  merchants,  manufac- 
turers, professional  classes,  or  even  laborers  to  congregate  in  New  York. 
The  very  fact  of  the  gradual  increase  of  population  shows  that  there  is 
a  margin  or  surplus  over  and  above  the  increase  of  rents. 

Secondly,  even  assuming  that  the  foregoing  is  not  true,  there  is  no 
reason  why  the  burdens  of  taxation  should  be  put  exclusively  on  the 
land  owners ;  for  then,  even  according  to  the  arguments  of  the  affirma- 
tive  themselves,  the  community  at  large,  such  as  merchants,  manufac- 
turers,  professional  classes  and  laborers  would  receive  a  benefit  from 
city  expenditures,  but  would  pay  nothing  at  all,  even  in  the  rentals 
smce  buildmgs  would  be  untaxed.  That  is  to  say,  the  community  at 
large  would  have  a  double  exemption ;  they  would  pay  no  direct  taxes  of 
any  kind  to  the  city,  nor  would  they  pay  any  taxes  indirectly  to  the 
land  owners,  since  it  is  conceded  by  the  affirmative  that  a  tax  on  land 
values  would  not  be  shifted  to  the  tenant.  The  net  result,  then,  would 
be  that  all  the  expenses  of  the  city  would  be  borne  by  the  land  owner 
alone,  although  a  large  part  of  the  benefits  would  accrue  to  other  classes 
as  well. 

We  have  now  considered  the  arguments  advanced  by  the  affirma- 
tive,  and  the  rebuttal  of  these  arguments  by  the  negative  We  now 
proceed  to  consider  the  alleged  positive  disadvantages  of  the  scheme 

'^7 


ill 


i'^ 


advanced  by  the  negative,  and  shall  then  discuss  the  rebuttal  of  these 
arguments  advanced  by  the  affirmative. 

III.     DISADVANTAGES  OF  THE  SCHEME  AS  SET  FORTH  BY  THE 

NEGATIVE. 

(i).  The  first  point  made  by  the  negative  is  the  so-called  confisca- 
tion-of-property  argument.  It  is  pointed  out  that  under  our  laws,  as  they 
have  existed,  people  have  been  encouraged  to  invest  in  land  as  well  as 
in  other  things.  What  possible  reason  is  there  for  the  government  now 
to  step  in  and,  by  utilizing  the  engine  of  taxation,  to  take  away  from 
present  owners  a  part  of  their  property?  Here  is  a  man  who4ias  worked 
hard  for  years,  gotten  together  the  sum  of,  say,  ten  thousand  dollars, 
and  invested  it  in  a  piece  of  real  estate,  where  the  improvements,  as 
frequently  happens,  are  worth  far  less  than  the  land.  He  works  hard, 
perhaps,  in  managing  his  piece  of  property  and  in  keeping  the  building 
in  good  condition  and  in  looking  after  the  continually  changing  tenants. 
Here  is  another  man  who  has  inherited  ten  thousand  dollars  from  his 
father,  or  has  made  ten  thousand  dollars  by  a  lucky  plunge  in  Wall 
Street,  and  who  buys  corporate  stock,  or  deposits  his  cash  in  a  bank, 
and  runs  oflf  to  Europe  to  have  a  good  time.  The  land  owner  finds,  as 
a  result  of  the  untaxing  of  buildings,  that  the  value  of  his  property  falls 
to  eight  thousand  dollars.  He  loses  not  only  a  fifth  of  his  capital 
invested,  but  must  pay  more  money  out  every  year  in  taxes.  The  suc- 
cessful stock  speculator  enjoys  in  perpetuity  the  full  amount  of  his 
property  and,  perhaps,  pays  no  taxes  at  all.  This  is  a  travesty  of  justice. 
It  is  an  unendurable  utilization  of  governmental  powers,  and  results  in 
practical  confiscation.  Several  of  the  witnesses  who  appeared  before 
the  Committee,  who  were  owners  of  vacant  land,  have  testified  how 
anxious  they  were  to  improve  the  property,  and  how  impossible  it  was 
for  them  to  secure  the  large  loans  needed  for  this  purpose  under  the 
circumstances.  They  have  called  our  attention  to  the  fact  that  the 
change  contemplated  would  simply  wipe  them  out.  Owners  of  more 
modest  houses  in  the  Borough  of  Manhattan,  on  both  the  east  and 
west  sides,  have  claimed  that,  as  a  result  of  the  untaxing  of  buildings, 
they  would  be  unable  to  keep  their  heads  above  water,  and  that  they 
would  have  to  sell  out  at  a  great  loss. 

It  has  been  contended  that  a  large  part  of  the  two  hundred  thou- 
sand owners  of  real  estate,  representing  about  a  million  of  the  popula- 
tion in  New  York  City,  are  in  a  condition  where  the  value  of  the  land 
considerably  exceeds  the  value  of  the  structures.  In  all  such  cases, 
and  they  are  far  more  numerous  than  is  supposed  by  those  who  think 
simply  of  the  Astor  Estate,  the  result  would  be  disastrous.  This  objec- 
tion would  only  be  slightly  weakened  by  the  proposition  to  decrease 
the  rate  on  buildings  gradually  for  a  term  of  years.  This  would  be  like 
pulling  a  man's  teeth  out  one  by  one  instead  of  pulling  them  all  out 
toeether.    The  net  result  in  the  end  would  be  equally  unfortunate. 

28 


The  exemption  of  buildings  is  defensible  only  on  the  thcoiy  :..-.i 
property  in  land  is  unjust,  and  that  all  land  ought  to  be  confiscated  by 
the  government.  Only  an  infinitesimal  number  of  people  in  the  City  of 
New  York,  less  than  one-hundredth  of  one  per  cent.,  hold  any  such 
opinion.  How  absurd,  then,  to  make  such  a  change  in  the  fundamental 
principles  of  the  city  tax  policy  in  order  to  satisfy  the  misguided 
demands  of  a  minute  fraction  of  the  population. 

(2).  The  immediate  result  of  the  adoption  of  the  scheme  would  be 
a  great  real  estate  panic.  It  would  lead  to  the  instant  stoppage  of  the 
loan  of  mortgage  funds  by  the  great  investing  companies,  and  would 
produce  such  an  apprehension  that  there  would  be  a  calling  in  at  once 
of  all  existing  loans.  This  would  mean  a  wiping  out  of  all  existing 
equities,  and  would  lead,  under  actual  conditions  in  New  York,  to  an 
unheard-of  disaster.  All  panics  arc  psychological  in  character,  and  are 
often  the  result  of  unreasoning  fear.  Whether  or  not  the  actual  con- 
templated injury  to  property  would  ensue  is  immaterial.  The  apprehen- 
sion or  the  fear  of  such  injury,  either  at  once  or  in  the  future,  would  be 
enough  to  bring  about  the  panic.  This  apprehended  injury,  moreover, 
would  not  be  confined  to  the  idea  of  any  immediately-added  burdens,  but 
would  consist  to  a  large  extent  of  the  apprehension  that  the  present 
project  was  simply  an  entering  wedge  for  a  much  more  complete  scheme 
of  confiscation  of  land  values  for  the  benefit  of  the  community. 

(3).  Entirely  apart  from  the  question  of  confiscation  of  property, 
the  scheme  would  lead  to  an  undue  and  unjust  burden  on  all  property 
owners  where  land  values  were  greater  than  building  values.  Under 
existing  conditions  in  New  York,  immense  sums  of  money  are  invested 
by  people  of  small  means  in  modest  shares  of  real  estate  parcels.  It  is 
unjust  to  add  to  the  existing  burdens  on  real  estate.  Real  estate,  as  a 
business,  is  in  a  most  depressed  condition  in  New  York.  To  increase 
the  burdens  at  this  time  would  be  suicidal  policy. 

(4).  The  untaxing  of  buildings  would  tend  to  increase  the  city 
expenses,  as  it  would  increase  the  congestion  per  acre.  Immense  sums 
would  have  to  be  expended  for  breathing  spaces  and  city  parks ;  streets 
would  have  to  be  widened  to  permit  of  the  increased  traffic ;  fire  hazards 
would  be  augmented,  and  in  every  way  the  difficulties  in  the  cost  of 
municipal  administration  would  be  increased. 

(5).  The  general  financial  condition  of  the  city  would  also  be  ren- 
dered more  difficult.  It  is  an  acknowledged  maxim  of  taxation  never  to 
narrow  the  base  in  the  face  of  an  anticipated  increase  in  the  amount  to 
be  levied.  Under  actual  fiscal  conditions  in  New  York,  there  is  great 
need  of  increased  revenue,  yet  the  proposition  is  to  reduce  the  base  in 
the  face  of  this  needed  increase.  The  Constitution  provides  that  the 
amount  to  be  raised  by  taxation,  exclusive  of  debt  service,  shall  not 
exceed  two  per  cent,  on  the  value  of  the  property.  The  contention  of 
the  affirmative  that  the  assessed  value  of  the  property  will  remain  the 

29 


ili 


1. 


i 


1! 

n 


-     a  legal  proposition,  iHs  det'thlt  »   het.  ^.e^ build""""".    ^^ 
so  as  to  be  only  one-hundredth  of  fh7  T       ,     .  '''"'^'"&''  '«  '''duced 

.ated  as  only  ::^J:r;^:si^  ;L?;rr-  --^  -  -- 
r  n:rer;:asfs"V:rr'  the  aUr  i^it  :=-^r 

land  will  lead  to  a  <^mrutbn  L^ vXelj'^kfraTtr  ^^^  ^^^'^  °" 
future  debt  will  be  wiped  out  »1  V^  '*'  *''*  '"^'"&'"  ^""^ 

the  city  credit  ow  n^ ':  aTess^le  :r^^^^^^  T^l  '^  '"  ™''^'™^"*  '" 
present  debt.    To  make  .urV,  n!  T^  •  ""^^'-'^n?  security  for  the 

is  reprehensible  L"heere„e"  ^''"""^"*^  "'*''  ^'"'^  "'^  «"-- 
'^'  !r7.^V"  ™'''  ARGUMENTS  BV  THE  AEEIRMATIVE. 
improvSient   „  the  condittn     f  .T     °" ,'"'  '""  "'^^'^  ^''^"^^'^^  -"X 

illiotten  Ja ts     T^    '^'  ^'  ^°'"'"""ity  ""ght  to  take  back  all  of  their 

..  i^f:.  .^^;=-^  o^r^far  .rt-;::.r 

in  his  Dronertv     Ti.^        11    ..  ^      guaranteeing  the  owner  forever 

L  ar^ff T/-^;  J  ^  '  ^"'"'^^^  '^  *^"  ^^^t  *hat  a  sudden  change  in 
the  tariff  or  in  the  system  of  internal  revenue  taxes  may  under  ceftan 
circumstances,  bring  about  a  loss  to  the  owner  of  cert^n  kinH.  nf  T 
or  property,  and  we  do  not  recognize  this  as  an^Te'S  t  u  t^^^^^^^^^ 
Still  another  class  of  advocates  of  the  scheme  concede  that  there 
will  be  a  loss  and  deplore  this  loss  in  the  case  of  what  tlel  confess  to 

Tchete  would  leTd't"^    '''  '''''     "'  ''  *'^^  '''''^'  ^^^  ^^^P^^^  ^^th 
scneme  would  lead  to  very  great  social  benefits,  the  property  loss  to 

owners  of  land,  while  regrettable,  must  not  be  deemed^uffi    ent^W^^^^ 

portant  to  interfere  with  the  greater  good  to  be  accomplished        "^ 

ther.      -1   K  ''^",^"^^^^^  '^^'^  ^f  the  advocates  of  the  scheme  think  that 

here  will  be  no  loss  to  property  owners  at  all,  because,  in  their  opin  on 

land   values  will   really  increase   rather  than   decrease,  owin^f  T  the 

80 


greater  demand  for  land  which  will  come  from  the  increase  in  building, 
and  from  the  additional  incentive  to  the  gross  population. 

The  assertion  that  there  is  no  general  interest  in  the  subject  is 
belied  by  the  fact  that  over  40,000  voters  in  the  City  of  New  York 
have  asked  for  a  referendum  on  the  question. 

(2).  With  reference  to  the  alleged  panic,  this  is  a  mere  figment  of 
the  imagination.  The  affirmative  rely  especially  on  the  opinion  of  the 
head  of  a  large  loaning  company,  and  upon  a  certain  other  gentleman 
connected  with  a  savings  and  loan  association.  They  quote  the  testi- 
mony of  these  two  gentlemen,  to  which  they  attach  more  importance 
than  to  all  the  other  real  estate  experts  who  testified.  Their  argument, 
in  short,  is  that  as  more  houses  would  be  built,  it  would  be  to  the 
interest  of  the  lenders,  through  pressure  of  competition,  to  supply  funds 
for  the  same,  while  money,  now  sunk  in  speculative  increases  in  the 
selling  price  of  land,  will  be  available  for  buildings. 

(3).  The  argument  as  to  the  injustice  of  increased  expense  to  the 
owner  is  sought  to  be  rebutted  by  the  affirmative  by  the  statement  that  an 
increase  of  expense  is  only  the  fair  return  for  what  will  sooner  or  later  be 
an  increase  of  revenue. 

(4).  The  argument  that  the  expenses  of  the  city  will  be  increased  is 
denied.  It  is  conceded  that  more  money  may  have  to  be  spent  for 
parks,  etc.,  but  it  is  claimed  that  there  will  be  a  saving  in  expense 
by  a  more  compact  city,  which  will,  among  other  things,  diminish  the 
need  of  very  expensive  subways,  etc. 

(5).  The  argument  as  to  the  constitutional  dangers  in  taxation  is 
sought  to  be  met  in  a  double  way.  In  the  first  place,  we  ought  not  to 
be  prevented  from  accepting  the  change  because  of  constitutional  doubts. 
If  the  change  is  a  good  one,  the  Constitution  can  easily  be  altered.  In 
the  second  place,  the  legal  argument  is  incorrect,  and  no  matter  what 
the  rate  of  taxation  is,  as  long  as  the  assessed  values  are  not  changed,  the 
fiscal  conditions  are  not  altered. 

(6).  As  to  the  debt,  several  points  are  made  in  rebuttal.  In  the 
lirst  place,  it  is  held  that  it  is  a  good  thing  to  put  obstacles  to  the 
creation  of  further  debt.  It  is  claimed  that  the  huge  debt  that  has 
already  been  piled  up  is  utterly  unnecessary,  and  even  if  necessary  it 
has  been  contracted  for  the  sole  benefit  of  the  land  owners,  therefore, 
It  is  held  that  either  we  should  stop  short  in  adding  to  the  debt,  or 
that  we  should  make  the  land  owners  pay  for  it.  In  the  second  plkce 
others  who  take  a  slightly  different  view  of  the  debt  and  the  city  credit 
contend  that  we  must  not  be  deterred  by  the  constitutional  provision' 
but  that  contemporaneously  with  the  change  proposed,  we  must  seek 
to  secure  an  amendment  to  the  Constitution. 

It  is  contended  by  others,  finally,  that  no  change  in  the  Constitu- 
tion is  needed,  and  that  notwithstanding  the  diminution  of  the  value  of 
the  land,  the  enormous  increase  in  land  values  to  be  expected  from  a 

81 


'!1 


I! 


<d^ 


■I 


growth  of  the  population  would  give  the  citv  all  th.  i 

needed,   and   that,   therefor,-    r.^    •        •  ^  ^  '^^^^^  that  is 

expected.  therefore,   no   impairment   of   the   credit   is   to    be 

CONCLUSIONS  OF  THE  COMMITTEE. 

Your  Committee  have  carefully  weighed  all  nf  fi,»    k 
and  counter  arguments     Ti,r..         weigned  all  of  the  above  arguments 

(I)  The  complLTy  of  the  s^7„l""  ""°"^  '^^^  "^^^  ^"^"'^  "P°«  "s: 
ticu.ar  point^the  ar^t^r^oVLTS:,  .teTeL^^  ^^^^^^^- 
ously  presented  and  in  not  a  few  ca,^«  th7  /.  "^^""^  ^'^°'- 

seems  to  be  in  more  or  less  doubt  ^.m""'  .  'T  °'  P^°''^t'ility 
each  side  are  inconclusive  IZ         a      ^^     ^"^  °^  ^^^  arguments  on 

the  same  side.  (aT  ^nVof  ,.-  ""^  '^  °'''""^  -"^""'"'^  °" 
and  the  disadvanta^f  of  "^h/ 1\  "^«7^"*^'  ^^  to  both  the  advantages 

by  each  side     A^fn  a^l  ,  ''  ^^""^  '*''^'°"^'y  ^''^  exaggerated 

bftterness  has  be::^:'rdl:7Tt  7-"^"*^'  ''""*''"'•  ""^^^  --" 
benefits  and  the  dangTrf thJa';  t^ZZr'""'  *°  ^"™^'^  '"••  ''^ 

both^s^t^^The^lptitSV^'c^  '7"^'  "/  "  "'"''  '^  "^^  ^PP-'  ^y 
tentatively  mad!  Z"  '^"  °'  American  towns  that  have 

Comm. t    e  concur  withtrr'.     •''"  'f-  "'"^  °'  '"^^  '^"''J-*'  ^^e 
tc  cuiiLur  witft  the  conclusions  of    ts  exoert    Dr    T^    u    xj  • 

who  has  made  a  thorough  study  of  these  experiments     Dr   W  * 

up  the  Canadian  experience  as  follows :      ''^P'"'"""*'-     ^'-  "^'^  «"«"« 
"It  has  been  customary  to  think  of  Western  Canad,  ,=  , 

In  some  places  the  pl.n  has  worked  well;  i„  olher  pl.cL  ,  htT  u  ! 
Poorty  ,„  pa„,eu,„  d,i.s  i.  has  give.%a«ac  io^a, "  ^, LTtd 
dissatisfaction  at  another."  '  ^"'' 

Dr.  Haig  tells  us  again  that  even  in  those  cases  "where  the  svstem 

rut\hart:^^  "*"'""''  ^^"-^  ^^'"-  --  increasing  enormrsr. 
but  that  with  the  stoppage  of  the  boom  the  situation  changed  entireJ; 
He  tells  us  again  that   "the  Canadian  experiments  have  been  confined 

Is  tr"h';:l'"';'"'  ''^^  "^'^^  Canadian  experience  off  rs  no  evTdence 
a    to  what  the  effect  may  be  where  land  values  are  increasing  unevenly 
or  where  the  margin  between  loans  and  securities  is  narrow  "    He  sa's' 
fur  hermore,  that  the  system  is,  even  "under  favorable  cTrcumstarce s 
neither  a  plague  nor  a  panacea."    While  he  concedes  that  "certaTn  defi 

th  :  ly  ta?ir°"^';"'V^"  '^  '''^^'  '''^^^^  -^^  adopts-  tnd 
aSe  huLT^  ^'""''''  '^*^''  "^^'"  conditions,  without  an  appreci- 
able burden  upon  property  owners."  he  also  writes :  "These  conditions 

A?berta  tolns  T^  "  ''T"'''  ^''"  '^^  ^''""^^  ^^«  '"''^^  '«  the 
Alberta  towns.      These  conditions  do  not  obtain  to-day  in  New  York 

33 


m 


City."  Again,  as  regards  the  American  experiment,  Dr.  Haig's 
con^clusion  is,  after  careful  investigation,  "that  there  is  little  basis  for 
drawing  conclusions  either  in  favor  of  or  in  opposition  to  the  plan  of 
exempting  buildings  from  taxation."  Finally,  as  to  the  situation  in 
Pittsburgh  and  in  Scranton,  Pennsylvania,  owing  to  the  fact  that 
the  gradual  exemption  of  buildings  was  only  a  very  incidental  fea- 
ture in  the  great  reform  of  abolishing  the  old  classification  scheme.  Dr. 
Haig  calls  attention  to  "the  hopelessness  of  expecting  clear-cut  imme- 
diate results  under  these  circumstances." 

In  considering  the  evidence  that  has  been  submitted  to  the  Com- 
mittee, both  in  writing  and  at  the  public  hearings,  the  Committee  have 
been  impressed  by  the  following  facts :  The  witnesses  may  be  divided 
into  five  classes,  viz.,  the  single  taxers,  the  real  estate  dealers  and  the 
loaning  interests,  the  representatives  of  the  laboring  classes,  the  owners 
of  small  parcels  of  real  estate,  and  scholars  and  publicists. 

The  single  taxers,  as  was  to  be  expected,  were  all  in  favor  of  the 
scheme  as  a  matter  of  general  principle.  The  real  estate  dealers  and 
the  experts  in  the  loaning  interest  were  all,  with  a  single  exception, 
opposed  to  the  scheme  because  of  the  anticipated  dangers,  and  there 
was  one  other  prominent  expert  who,  although  not  inimical  to  the 
proposition  as  a  matter  of  theory,  declared  himself  opposed  to  the 
scheme  as  a  practical  proposition  at  present.  The  representatives  of  the 
labor  interest  were  in  favor  of  the  scheme  because  of  their  belief  that 
it  would  lead  to  lower  rents  and  more  employment.  The  more  modest 
owners  of  property  were  divided;  that  is,  those  who  were  owners  in 
the  suburbs,  where  land  values  are  still  less  than  building  values,  were 
in  favor  of  the  scheme.  Those  in  other  parts  of  the  city,  and  especially 
in  the  Borough  of  Manhattan,  where  land  values  are  greater  than  build- 
ing values,  were  opposed  to  the  scheme.  Finally,  while  the  scholars  and 
publicists,  who  might  be  supposed  to  take  an  impartial  attitude,  were 
divided  in  their  judgment,  the  preponderance  of  opinion  was  opposed  to 
the  scheme,  either  as  a  matter  of  general  principle  or  as  a  matter  of 
immediate  application. 

As  a  final  result  of  a  careful  weighing  of  all  the  evidence  in  the 
case  your  Committee  have  come  to  the  following  conclusions : 

We  believe,  in  the  first  place,  that  both  the  advantages  and  dangers 
of  the  scheme  have  been  exaggerated  by  each  side.  We  believe  that 
there  still  remain,  as  a  matter  of  principle,  certain  advantages  as  well  as 
certain  disadvantages.  We  think  it  entirely  possible  that  there  may  be 
a  temporary  decrease  of  rents.  We  believe,  however,  that  the  extent  of 
this  decrease  has  been  grossly  overestimated.  Moreover,  we  think  that 
even  if  there  should  be  a  tendency  to  a  permanent  decrease  of  rents,  it  is  not 
at  all  improbable  that  the  result  of  decreased  rents  will  be  in  the  direc- 
tion of  lower  wages.  We  also  believe  that  there  will  not  be  any  substan- 
tial final  difference  in  the  demand  for  labor. 

38 


Illfi' 


It 


i  < 


1^! 


■I: 


ii; 


I  '   mV 

I'  ml' 


1  ! 


M 


!■! 


1^ 


On  the  other  hand,  we  cannot  but  be  sensible  of  the  disadvantages 
of  the  scheme,  both  as  a  general  proposition  and  in  its  practical  appli- 
cation to  the  City  of  New  York.  We  think  that  it  has  been  clearly 
proved  that  the  tendency  of  the  scheme  would  be  to  a  more  intensive 
use  of  land  and  that,  therefore,  it  would  be  out  of  the  question  to  adopt 
the  scheme  without  first  enacting  laws  to  regulate  the  height  of  build- 
ings  and  to  provide  for  a  proper  zoning  system.  Without  such  prelim- 
inary measures  the  scheme  would  not  be  defensible,  even  as  a  general 
proposition.  In  the  second  place,  while  we  think  that  the  financial 
dangers  have  been  somewhat  exaggerated,  we  believe  that  it  would  also 
be  prudent  to  provide  for  a  change  in  the  constitutional  provisions  affect- 
ing the  tax  rate  and  the  debt  limit  before  we  could  even  think  of  recom- 
mending the  scheme  in  general. 

Apart  from  these  general  doubts  as  to  the  advisability  of  the 
scheme,  there  are  particular  circumstances  in  the  City  of  New  York 
which  afford  ground  for  serious  hesitation.  New  York  is  the  greatest 
metropolis  of  the  New  World,  and  is  probably  destined  soon  to  be  the 
greatest  metropolis  of  the  entire  world.  Business  operations  of  the 
greatest  delicacy  and  the  greatest  magnitude  are  common.  The  com- 
plexity of  property  interests  is  enormous  and  the  conditions  of  land- 
holding  differ  from  borough  to  borough  and  almost  from  street  to 
street  within  the  same  borough.  In  our  opinion,  the  probable  result  of 
the  contemplated  change  would  be  to  benefit  some  property  owners 
and  to  injure  other  property  owners.  After  careful  investiga- 
tion, our  expert.  Dr.  Haig,  has  pointed  out  that,  while  the 
anticipated  benefits  to  the  home  owners  in  the  outlying  bor- 
oughs might  be  very  slow  of  realization,  there  is  no  doubt  as  to  the 
effect  of  the  change  on  the  magnitude  of  taxes  payable  by  the  owners 
of  the  single-family  dwellings  in  Manhattan,  and  that  it  would  lead  to 
a  depressing  influence  upon  land  values.  It  has,  moreover,  been  proved 
to  our  satisfaction  that,  in  the  Borough  of  Manhattan,  at  least,  the  bur- 
den would  be  relatively  heavier  upon  the  owners  of  the  less  expensive 
parcels  of  real  estate,  and  that  in  a  not  inconsiderable  number  of  cases 
the  actual  diminution  of  value  to  the  owners  of  property  would  be 
considerable. 

This  is,  in  our  mind,  the  chief  consideration  that  impels  us  to 
doubt  the  wisdom  of  the  contemplated  change.  Even  if  the  anticipated 
benefits  of  the  scheme  were  to  be  immediate  and  unquestioned,  it  would 
still  be  doubtful,  in  our  opinion,  whether  these  benefits  on  the  one  hand 
would  not  be  outweighed  by  the  added  burdens  on  the  other.  But 
where,  as  is  undoubtedly  the  case  here,  the  benefits  of  the  scheme  have 
been  much  exaggerated  and  would  be  slow  in  coming;  where,  in  other 
words,  the  extent  of  the  benefits  is  questionable,  and  the  fact  that  the 
added  burdens  to  certain  classes  is  unquestionable,  the  conclusion  in 
our  minds  is  irresistible.    It  would,  in  our  opinion,  be  neither  fair  nor 

34 


wise  to  cause  the  owners  of  real  estate,  and  especially  the  owners  of 
the  more  modest  parcels  of  real  estate,  to  suffer  diminution  in  the  amount 
of  their  invested  capital  because  of  vague  and  uncertain  benefits  to 
other  classes  that  might  ultimately  be  expected.  As  in  every  practical 
problem  of  statesmanship,  the  losses  and  the  gains  must  be  weighed 
against  each  other.  In  the  opinion  of  this  Committee,  the  losses  to  the 
community  as  a  whole,  under  existing  economic  conditions  in  New  York 
City,  would  outweigh  any  probable  gains.  We  have,  therefore,  come  to 
the  conclusion  that  it  would  be  unwise  in  the  City  of  New  York  to 
exempt  buildings  from  taxation. 

ALFRED  E.  MARLING, 
EDWIN  R.  A.  SELIGMAN, 
FRANK  HARVEY  FIELD, 
JOSEPH  N.  FRANCOLINI. 
JOHN  J.  HALLERAN. 
JEREMIAH  W.  JENKS, 
ARDOLPH  L.  KLINE, 
WALTER  LINDNER, 
CYRUS  C.  MILLER, 
GEO.  V.  MULLAN, 
DAVID  RUMSEY. 
OSCAR  R.  SEITZ, 
ROBERT  E.  SIMON, 
CHARLES  T.  WHITE, 
COLLIN  H.  WOODWARD. 

UNTAXING  OF  BUILDINGS. 
Concurring  Memorandum  by  Messrs.  Pink  and  Holt. 

The  theory  of  untaxing  buildings  is  logical  and  right.  Many  who 
believe  in  the  principle  view  the  practical  application  of  the  plan  here 
with  grave  apprehension. 

The  chief  arguments  for  the  untaxing  of  buildings  are  the  social 
benefits  that  would  accrue ;  cheaper  rents,  encouragement  to  ownership 
of  small  homes,  participation  by  the  community  in  the  values  created 
by  the  community. 

On  the  other  hand,  it  is  not  denied  that  the  property  of  many  would 
be  confiscated,  and  that  the  change  would  take  money  out  of  the  pockets 
of  owners  of  unimproved  and  underimproved  land  and  put  it  into  the 
pockets  of  those  whose  property  is  highly  developed. 

Most  real  estate  owners  are  to-day  facing  a  loss,'  and  the  introduc- 
tion of  this  change  in  taxation  would  still  further  discourage  owners  of 
vacant  and  underimproved  property,  reduce  values  and  result  in  consid- 
erable decrease  in  the  city  revenue.  The  city  has  so  lavished  its  credit 
on  subways  and  water  supply  that  a  huge  bonded  indebtedness  con- 

35 


^nT  ""'ul^  T  t"T'  *'^^''''  ^"^"^^  ^"<1  «=«"*«<=*  the  base  of  taxa- 
tion  would  be  foolhardy. 

o..t  ?n"V^"r*  ^'l'  '°"^^  ^'"''^''  °^  ^'^^  P'^"  ''^  l«&«ly  realized  with, 
out  confiscafng  the  property  of  innocent  people  and  placing  the  city 
in  a  precarious  situation?  6   •-  ^  ^ity 

win  l^'  '""7^"^  *^^  ^i"  take  from  those  who  are  able  to  pay  and 
will  br.ng  back  to  the  city  part  of  the  value  the  people  create. 

Exemption  of  the  first  $2,000  from  taxation  in  the  case  of  one-  and 

l^°ir\  i  °J  semi-detached  houses  will  encourage  the  build- 

o^^    r'°;k'ngmen's  homes  and  home  ownership.    It  will  tend  to  bring 

o  market  land  now  idle  but  within  the  reach  of  transit  and  pubS! 

improvements.  f"^"^ 

If  we  remove  the  tax  on  all  buildings  we  encourage  congestion  in 
hickly-populated    districts    where    high    land    values    prevail         f    we 

tSTorm' il'^T  '  >   '"  '"  ^  ^P^^^'^  '^^^  ^^  ^-^^-^'  -  -— ^e 
tediv    ^  Tl'  "'''''"'^  '^  "PP^y  ^  ^^"^^^^  ^^'^^^^  which  admit- 

ted  y  will  do  harm  as  well  as  good  when  we  can,  by  specific  applications 

in.  nJ  r/''"'"  '"^  encourage  industries  to  locate  here  and  the  build- 

Tofytu^dtr  "^  '  "'"^  ^  '^^""^^^  ^^  ^'^  "^  ^"  '^^  ^- 

The  entire  population  of  New  York  can  be  accommodated  in  one- 

lefTlor  tr"-iT     "  '''  '"""'  '^^'^^^  ^"^  "^-^  — ^  I-^  will  be 

we  give  the  workers  an  opportunity  to  live  in  homes  instead  of  four' 

tT/Ln  ""'"'"'  ^"J  '^^^^''^  '^'  '""  ^^  ^^^  y^^^^  -«d  fields  instead  of 
the  paved  court  and  crowded  street. 

fit  hi^^'^'V  't  '^"f^^^^d  ^^«d  business  for  government  to  provide 
fi  housmg  for  the  toiler  and  the  day  is  not  far  off  when  America  must 
give  serious  consideration  to  this  problem. 

In  Belgiurn,  workmen's  dwellings  are  exempt  from  a  number  of  the 
local  taxes  and  societies  whose  object  is  the  erection  of  such  home  Ire 
not  compelled  to  pay  stamp  duties  or  registration  fees. 

suh.t/nT7  ^'''''  ^''*'^^  exemption  to  workingmen's  dwellings,  and 
substantial  encouragement  to  building  and  loan  associations 

divis  on?bTth:  nor  '"7  ''''"  '"'^''^  ^"  ^'^  ^^™-  governmental 
tZTu  u      r  ^'^  ""^  ^'^"^^"^  '^'"^  encouragement  to  owners  of 

small  homes  has  been  generally  adopted.     Many  cities,  among  which 
Ulm  IS  notable,  build  artisans'  dwellings  and  sell  and  rent  them^at  co  t 
fl,.  f  ""^^^^,^^^"^Pt^  ^'^^  state  taxes  company  houses  complying  with 
the  sanitary  laws    rented  or  sold  to  workingmen  on  easy  insUlments 
An  allowance  is  also  made  from  municipal  and  communal  taxes. 

Massachusetts  has  recently  adopted  an  amendment  to  the  Constitu 
tion,  authonzmg  cities  and  towns  to  acquire  land,  improve  it,  and  se„ 

36 


the  buildings  for  the  purpose  of  relieving  congestion  and  providing 
homes  for  workers.  It  is  provided,  however,  that  the  State  shall  not 
sell  the  land  and  buildings  at  less  than  cost. 

CONCLUSION. 

We  are  agreed  with  the  minority  that,  theoretically,  the  exemption 
of  improvements  from  taxation  is  desirable.  We  hold  with  the  majority 
that  it  would  be  inadvisable  to  alter  radically  the  base  of  taxation  on 
real  property  in  the  City  of  New  York  at  the  present  time.  We  favor 
strongly  an  increment  tax  on  land  values,  to  go  into  effect  as  soon  as 
possible,  and  the  exemption  of  the  first  $2,000  of  the  cost  of  one-  and 
two-family  houses,  detached  or  semi-detached. 

We  believe  that  the  partial  exemption  of  new  factory  buildings 
from  taxation  should  receive  serious  consideration. 

If  the  exemptions  prove  socially  beneficial,  the  City  will  be  in  posi- 
tion to  make  further  experiments  in  the  direction  of  untaxing  improve- 
ments. 

LOUIS  HEATON  PINK, 
HAMILTON  HOLT. 


UNTAXING  OF  BUILDINGS. 
Minority  Report. 

The  undersigned  dissent  from  the  conclusions  of  the  majority  as  to 
the  untaxing  of  buildings,  and  regard  the  summary  of  the  arguments, 
pro  and  con,  contained  in  the  majority  report  as  incomplete  and  inade- 
quate. Although  the  burden  of  proof  rested  upon  the  affirmative,  less 
than  one-third  of  the  space  devoted  to  the  summary  is  taken  up  with 
the  elaboration  of  the  arguments  in  favor  of  the  proposition  and  in 
rebuttal  of  the  arguments  against  it.  The  Committee  was  at  work  for 
eighteen  months  collecting  data  on  this  subject,  but  the  subsequent  time 
devoted  to  a  study  of  this  data  and  to  a  consideration  of  the  many  intri- 
cate issues  involved  was  altogether  too  short  to  enable  the  Committee 
as  a  whole  to  reach  definite  conclusions  based  on  the  evidence  before  us. 

In  order  that  the  case  of  those  who  favor  the  untaxing  of  buildings 
may  be  fairly  and  fully  presented,  it  will  be  necessary  for  us  to  restate 
the  arguments.  The  question  at  issue  is  not  altogether  a  new,  and  by  no 
means  a  local,  one.  A  man  does  not  have  to  live  in  New  York  in  191 5 
to  think  of  this  question :  "When  I  make  an  improvement,  why  should 
the  city  fine  me  for  doing  it?"  or  this  other  question:  "If  my  land  gets 
to  be  worth  a  great  deal  more  by  reason  of  the  growth  and  activity  of 
the  community,  why  should  not  the  city  take  a  larger  share  of  the 
increment,  instead  of  levying  taxes  on  buildings  and  other  products  of 
individual  industry?"     All  the  world  is  thinking  about  these  questions, 

87 


I  t 


1 1 


■J'  li! 


I 


<    {  ■! 


and  in  many  parts  of  the  world  action  is  being  taken  more  or  less  similar 
to  that  proposed  here.  The  cities  and  provinces  of  Western  Canada 
have  exempted  buildings  from  taxation  with  the  results  set  forth  in  part 
in  Dr^Haig's  admirable  report  on  "The  Exemption  of  Improvements 
from  Taxation  m  Canada  and  the  United  States."  Bulletin  158  of  the 
United  States  Department  of  Labor,  in  discussing  "Government  Aid  to 
Home  Owning  and  Housing  of  the  Working  People  in  Foreign  Coun- 
tries, shows  that  the  production  of  workingmen's  homes  is  encouraged 
either  through  direct  exemption  in  whole  or  in  part  from  taxation  or 
through  the  levy  of  a  special  tax  on  unused  building  sites  or  on  the 
increment  of  land  values  in  Austria,  Germany,  Hungary.  Italy,  Switzer- 
land, Belgium,  France,  Roumania  and  Chili. 

In  England,  the  Land  Enquiry  Committee,  appointed  by  the  Chan- 
cellor of  the  Exchequer,  reporting  in  1914.  stated,  among  its  conclusions. 

nr^,  "0^'"8'.  *o  the  inclusion  of  the  value  of  buildings  and  other  im- 
provements m  the  basis  of  assessment,  the  present  rafing  system  ham- 
pers industry  ,n  general  and  agriculture  in  particular  ^ 

In  towns  the  discouragement  of  improvements  is  feh  most  bv 
small  tradesmen  and  others  who  work  on  a  small  margin  of  proT     ^ 

Both  in  urban  and  in  rural  areas  the  rating  of  buildines  is  an 
ablf  rent."         *'^  °   P™"'""^  ^°°^  ^°^'''"S  class  houses  at^reLn- 

m.JJt.  *''*^'  °'"  Paj-ti^'.^'mption  of  buildings  and  other  improve- 
ments from  rates  would  stimulate  the  development  of  industry  and  aeri- 
*'""■'!, f"/  encourage  the  provision  of  working  class  houses. 

tK.  .,1  uZ  l"'"'^^^^^  '"  '°"'  expenditure  that  are  chargeable  on 
the  rates  should  be  met  by  a  rate  upon  site  values." 

Prof.  Thomas  Nixon  Carver,  the  celebrated  Harvard  economist  in 
his  new  book,  "Essays  on  Social  Justice,"  issued  in  1915,  in  concluding 
his  discussion  on  the  subject,  says: 

"Because  a  considerable  extension  of  the  land  tax  would  tend  to 
force  into  productive  use  a  certain  amount  of  land  which  is  now  he  d 
out  of  use  for  speculative  purposes ;  because  it  would  tend  to  relievt 
active  production  froni  the  repressive  burdens  of  taxation,  and  because 
It  would  tend  to  cut  off  the  incomes  which  now  support  capable  men  in 
idleness,  thus  forcing  a  certain  amount  of  talent  into  action,  we  must 
conclude  that  an  extension  of  the  land  tax  would  work  well  for  the 
nation. 

Moreover,  Dr.  Haig,  this  Committee's  expert,  whose  conclusions 
are  quoted  at  some  length  and  relied  upon  by  the  majority,  in  his  oral 
testimony  stated  unequivocally  that  he  believes  the  tendency  of  the 
scheme  to  untax  buildings  on  the  whole  to  be  in  the  right  direction  and 
m  his  report  on  its  application  to  New  York  conditions  said  ih^t  "the 
change  promises  ultimate  benefits  of  considerable  importance  to  all  tenants 
and  to  many  of  the  home  owners  in  the  outlying  boroughs/' 

The  general  principle  involved  in  the  partial  or  complete  exemption 
of  buildings  from  taxation  is  supported  by  its  advocates  on  grounds 

88 


both  of  justice  and  of  expediency.    These  grounds  may  be  summarized 
as  follows: 

ARGUMENTS  FOR  UNTAXING  BUILDINGS   BASED   ON  JUSTICE. 

1.  Land,  in  the  broad  sense  of  the  term,  is  different  from  all  other 
species  of  property.  Its  situs  is  fixed.  It  can  neither  come  nor  go.  It 
is  neither  made  nor  destroyed.  Its  quantity  cannot  be  either  increased 
or  decreased  by  use  or  by  human  effort.  Its  value,  for  city  purposes  at 
least,  is  wholly  dependent  upon  advantages  of  location  with  reference 
to  the  needs  and  uses  of  population.  As  people  come  to  a  particular 
spot  and  invest  labor  and  capital  there,  the  value  of  the  land  is  created 
and  increased  by  community  effort  and  community  use.  Even  the  birth 
of  a  child  or  the  advent  of  a  stranger  or  an  immigrant,  by  increasing 
the  business  of  the  community,  adds  to  the  value  of  the  land.  While  it 
may  be  said  that  land  values  are  created  by  labor,  by  investment  and 
by  human  activity  generally,  it  is  clear  that  in  their  creation  human 
efforts  and  activities  are  so  intermingled  as  to  make  these  values  a 
community  product.  The  increment  of  land  value  created  by  the 
presence  or  activity  of  the  individual  may  be  regarded  as  his  indivisible 
but  inalienable  share  in  the  community  wealth.  The  rental  value  of 
the  land  is  the  income  from  this  common  fund  and  should  be  devoted,  as 
far  as  may  be  required,  to  the  payment  of  necessary  community  expenses. 
Until  this  income  is  completely  used  up,  it  is  both  prodigal  and  unjust 
to  let  it  be  appropriated  by  private  individuals  while  the  community 
expenses  are  met  in  part  by  the  levy  of  oppressive  taxes  upon  buildings 
which  are  the  direct  product  of  individual  labor  and  investment  and 
which  are  the  direct  instruments  of  industry  and  social  activity. 

2.  Not  only  are  land  values  created  by  the  general  activities  of  the 
people,  but  they  are  especially  the  product  of  governmental  expenditures 
Every  dollar  wisely  spent  by  the  city  government  either  increases  land 
values  or  prevents  their  fall.  This  fact  is  recognized  in  the  case  of 
ordinary  street  improvements,  which  are  paid  for  in  whole  or  in  part 
by  special  assessments  upon  the  property  directly  benefited.  This 
principle  is  almost  universally  recognized  in  America,  but  in  some  cities 
it  is  more  widely  applied  than  in  New  York.  Special  assessments  are 
frequently  used  for  the  acquisition  and  development  of  park  systems  and, 
in  some  cases,  for  the  extension  of  water  mains.  In  New  York,  a  few 
years  ago,  the  Rapid  Transit  Law  was  amended  to  make  possible  the 
use  of  special  assessments  for  the  construction  of  rapid  transit  lines, 
but  the  jealousies  of  the  different  sections  of  the  city  and  the  fact  that 
some  lines  had  already  been  built  out  of  the  general  funds  prevented 
the  use  of  this  plan  in  connection  with  the  tremendous  system  of  rapid 
transit  development  now  under  way.  But  everybody  knows  that  this 
public  improvement  will  add  immensely  to  the  value  of  lands  situated 
in  many  parts  of  the  city.     It  cannot  be  successfully  disputed,  either, 

39 


j  • 


1! 


that  the  buildmg  of  bridges,  the  extension  of  water  mains,  and  other 

ZZr%  r^T''  '''  '"''''  ^""^  ascertainable  benefits  to  «'' 
tarn  ands.  But  m  the  case  of  many  improvements,  such  as  the  rapid 
trans>t  system  the  benefits  are  so  widely  diffused  that  h  would  ^e 
.mposs>ble  to  locate  all  of  them  even  by  the  most  elabo  atT^pecial 
assessment  scheme.  It  is  contended  that  more  general  improvement 
and  services,  such  as  the  construction  of  schoolhouses  and  the  maSten- 
ance  of  schools,  the  installation  and  maintenance  of  a  systirof  fire 
protection,  the  maintenance  of  an  efficient  health  departm'^.nt,  ani  thl 
urn.shmg  of  adequate  police  protection,  and  all  the  other  ;xpens  ve 

nT" V  V  ^°^r-^"*-  •'y  '— ing  the  advantages  of  locXn 
m  New  York  are  reflected  directly  in  the  increase  of  site  values  here 
It  .s  urged  that  land  gets  the  exclusive  net  financial  benefit  of  cTty 
expenditures  and  that,  therefore,  land  should  pay  the  taxes 

himself  tTr"'  u!"  P°'"'"^  °"*  "^'^  ^"^■■y  P"^^''^^^^  °f  l^nd  buys 
h  mself  free  from  all  future  taxes  at  the  established  rate.    The  taxes  are 

accounted  :n  the  price  he  has  to  pay  for  the  land.    He  Tm    ely  the 

IZZ^'        ■  .  '"?'^'"  ^y  '■""'°"  °*  ^"  '""^^s^d  assessment 

based  on  an  mcreased  value,  still  the  owner  is  only  giving  up  a  percent 

age  of  what  comes  to  him  gratis,  and  in  reality  he  escapes^he^urden 

uJTT  .  °^f ''■  u""''"  *^  '"''  °f  *^-^t-"  i^  -"eased.  It  t 
urged  therefore,  that  the  transfer  of  the  tax  on  buildings  to  land  values 
would  not  be  unjust  even  if  it  should  result  in  some  decrease  [n  the 
capital  value  of  land  as  reflected  in  the  selling  price,  as  this  is  the  only 
way  m  wh.ch  any  real  share  at  all  of  the  burdens  of  government  can 
be  placed  on  the  present  owners  of  land,  as  such. 

U  J'  ^^^u  r"''f 'P  '"  ^'^  ^"'^  ^''y  t^"d«  t°  be  a  monopoly.  It 
.s  alleged  that  one  hundred  families  are  the  owners  of  record  of  land 
assessed  m  1915  at  $473,808,075,  which  is  approximately  one-tenth  of 

LnV  I'u'''"^  ^""'  °'  '""^  •"  ''''  "*y-  The  improvements  on  the 
of  thf.  .  .  '^'''  T"f '^  ^*  °"'y  $157,515,235,  or  about  one-eighteenth 
of  the  total  assessed  value  of  improvements  in  the  city.  This  indicates 
tha  many  large  land  owners  are  keeping  their  holdings  wholly  or  par- 
tially unimproved,  expecting  to  profit  from  the  unearned  increment  at 
the  expense  of  the  community.  It  is  further  alleged  that  800  families 
own  land  assessed  at  800  millions,  which  is  more  than  one-sixth  of  the 
aggregate  assessment  of  land  values,  and  that  3,000  families  own,  direct- 
ly or  through  real  estate  corporations,  about  two-fifths  in  assessed  value 
of  all  the  land  m  the  city.  These  figures,  though  not  officially  verified 
were  not  disputed  by  any  witness  or  by  any  member  of  the  Committee 
It  is  contended  that  these  semi-monopolistic  conditions  would  justify 
the  pohcy  of  levying  a  heavier  tax  on  land  values  for  the  purpose  of 
equalizing  tax  burdens  and  restricting  the  advantages  of  private  mon- 
opoly in  the  most  fundamental  of  all  human  necessities.    It  is  pointed 

40 


out  specifically  that  real  estate  paid  87  per  cent,  of  the  city  budget  in 
1880,  but  only  75  per  cent,  in  1913. 

ARGUMENTS    FOR   UNTAXING    BUILDINGS    BASED    ON 

EXPEDIENCY. 

5.  The  untaxing  of  buildings  and  the  corresponding  increase  of 
the  tax  burden  upon  land  values  would  tend  to  compel  the  owners  of 
the  most  valuable  sites,  which  in  general  are  those  nearest  the  business 
center  of  the  city,  to  improve  them  if  vacant,  or,  if  already  partly 
improved,  to  improve  them  more  fully.  This  would  do  away  with  the 
long  stretches  of  vacant  land  now  held  out  of  use  past  which  home- 
seekers  are  compelled  to  go  to  the  suburbs  in  search  of  cheap  lands  for 
use.  It  would  also  tend  to  do  away  with  the  old  ramshackle  buildings 
in  lower  Manhattan  and  lower  Brooklyn  and  compel  their  replacement 
with  commodious  modern  buildings.  The  whole  tendency  would  be 
toward  the  development  of  a  compact,  symmetrical  city,  and  consequent 
great  economies  in  public  expenditures  for  streets,  sewers,  water  mains, 
transit  lines,  fire  and  police  protection,  public  lighting,  garbage  collec- 
tion, etc.  While,  on  the  other  hand,  the  city  might  be  compelled  to 
acquire  more  parks  and  breathing  places  to  take  the  place  of  private 
lands  now  held  vacant,  the  cost  of  the  park  lands  to  be  acquired,  as 
well  as  the  cost  of  lands  for  all  other  city  purposes,  would  be  reduced 
by  the  partial  or  complete  elimination  of  speculative  values.  Moreover, 
when  the  city  depends  on  private  owners  to  maintain  open  spaces  for 
public  benefit,  it  is  leaning  on  a  broken  reed ;  for  sooner  or  later  these 
places  will  be  improved,  and  then  the  city,  at  enormously  greater 
expense,  will  have  to  acquire  other  lands  and,  perhaps,  destroy  expen- 
sive improvements  located  upon  them.  To  depend  on  private  forbear- 
ance for  the  satisfaction  of  this  public  need  is  only  saddling  the  inevit- 
able burden  on  the  future  and  permitting  an  irregular  and  unsymmetri- 
cal  development  for  the  present. 

6.  The  untaxing  of  buildings  and  the  further  penalization  of  own- 
ers who  hold  vacant  land  out  of  use  would  stimulate  the  erection  of 
buildings.  On  vacant  land  ripe  for  improvement  appropriate  structures 
would  be  erected.  On  used  land,  where  the  buildings  were  already  old 
and  inadequate,  the  day  of  their  replacement  by  fit  structures  would  be 
hastened.  This  would  tend  to  eliminate  the  slums,  make  a  better  built 
city  and  increase  its  real  wealth  and  prosperity. 

7-  Through  the  competition  of  more  and  better  buildings,  rents 
per  unit  of  space  occupied  would  fall  and  the  people  would  have  the 
choice  of  taking  better  accommodations  for  the  same  money  or  of 
devoting  the  margin  saved  in  the  decrease  of  rents  to  other  uses.  This 
relief,  even  if  it  were  comparatively  small  in  amount  in  the  individual 
case,  would,  in  the  aggregate,  represent  an  immense  social  benefit. 

8.    The  increase  in  building  activity  would  reduce  unemployment 

41 


\  r* 
\ 


\4 


I    i 

i  3 


'i' 


'i 


t, 


IP 


I      I J 


K  11 


,nerLH^''"'"f''  ^^^  cheapening  of  vacant  land  by  the  elimination  of 

inn  i         ,7i"'''  T'*  ^''.'■^"^^•^  '•'^  ^^^"Pt-""  °f  buildings  from  taxa- 
t.on  U  would  be  made  eas.er  for  mechanics  and  men  of  moderate  means 
to  acquire  homes  m  the  suburbs.    Generally,  the  cost  of  a  modest  home 
m  the  outlymg  sections  is  two  or  three  times  the  cost  of  the  land   even 
under  present  conditions.     It  is  well  known  that  realty  development 
companies  capitalize  the  expected  future  increase  in  the  value  of  the 
land  and  fix  their  prices  on  this  basis,  especially  where  the  purchaser 
buys  the  property  on  the  easy-payment,  instalment  plan.     Speculative 
values  of  land  are  poor  security  for  loans  in  any  case.    The  home-seeker 
has  to    urnish  or  borrow  the  price  of  the  land  the  same  as  the  cost  of 
the  building.     If  the  price  of  the  land  were  less,  its  stability  of  value 
would  be  greater  and  the  amount  of  the  investment  required  would  be 
less.    All  this  decrease  would  come  oft  the  amount  of  the  loan  required 
and  therefore  the  owner,  putting  in  the  same  amount  of  money,  would 
have  a  larger  proportionate  equity  in  the  property.    On  the  other  hand, 
the  rehe   of  the  building  from  taxation  would,  in  the  case  of  practically 
all  small  home  owners,  result  in  a  considerable  net  decrease  in  tax 
burdens,  and  would  pro  tanto  increase  their  ability  to  pay  the  interest 
on  their  loans.    It  is  well  known  that  the  ability  of  the  individual  bor- 
rower to  pay  interest  and  ultimately  liquidate  his  debt  is  one  of  the  chief 
elements  of  security  taken  into  consideration  in  the  loaning  of  money 
even  on  real  estate  mortgages.    Hence,  the  rate  of  interest  to  be  paid 
on  loans  would  be  reduced  on  account  of  the  greater  security  or  the 
proportionate  size  of  the  loans  obtainable  at  the  present  rate  of  interest 
would  be  increased.     In  either  case,  house-building  would  be  encour- 
aged.    This  would  result  in  drawing  people  out  of  the  crowded  tene- 
ments m  the  slum  districts,  thus  helping  to  solve  the  problems  of  disease 
incident  to  congestion,  and  particularly  the  tuberculosis  problem 

r  u'°;.-  ^""^  ^*'""^'  ^^^''^  °*  ^  reduction  in  rents  and  of  the  exemption 
of  buildings  from  taxation  would  be  to  attract  population  and  indus- 
tries to  New  York,  and  thus  increase  the  city's  general  prosperity  This 
would  tend  to  restore  on  the  basis  of  actual  use  value  the  selling  price 
of  land  which  now  contains  a  speculative  or  unreal  element. 

We  have  given  what  we  believe  to  be  a  fair  statement  of  the 
serious  arguments  in  support  of  the  general  principle  here  under  discus- 
sion. It  will  now  be  necessary  to  take  up  the  arguments  made  by  the 
opposition.  Following  the  plan  of  the  majority  report,  we  may  first 
consider  arguments  advanced  to  disprove  the  claims  of  those  who  favor 
the  plan,  and  then  take  up  the  specific  objections  urged  by  its  oppo- 
nents. But  we  shall  not  content  ourselves  with  a  mere  summary  of 
assertions,  but  shall  attempt  to  analyze  the  arguments  as  they  are 
presented. 

43 


ARGUMENTS  TO   DISPROVE   THE   CLAIMS   OF  THE   AFFIRMATIVE. 

1.  The  opponents  of  the  plan  deny  that  land  is  essentially  difJer- 
ent  from  other  species  of  property,  or  should  be  treated  differently. 
They  say  that  land  values  are  the  product  of  human  labor  and  the 
investment  of  capital  just  as  much  as  other  values  are,  but  they  do  not 
answer  the  argument  that  the  land  value  of  any  particular  parcel  is 
not  created  by  the  labor  and  capital  of  the  owner,  but  by  the  general 
growth  and  activities  of  the  communty.  However,  they  say  as  to  owners 
who  have  purchased  land  with  their  own  savings  that  the  investment 
represents  labor  and  capital  the  same  as  any  other  investment,  and  is 
entitled  to  the  same  protection  from  the  State.  This  is  true,  but  it 
must  be  remembered  that  the  State  does  not  guarantee  private  invest- 
ments except  in  enterprises  devoted  to  public  service  and  subject  to 
public  regulation.  When  the  slaves  were  freed  the  government  did  not 
pay  for  them.  When  prohibition  laws  are  enacted  the  government  does 
not  pay  for  the  liquor  in  stock  or  for  the  saloon  fixtures  and  the  good- 
will of  the  business.  When  men  put  money  into  speculative  enterprises 
and  stand  to  lose  either  through  the  ordinary  course  of  competition  or 
through  changes  in  governmental  policy,  they  are  not  protected  from 
loss.  This  is  not  intended  as  a  complete  answer  to  the  confiscation 
argument,  which  will  be  discussed  further  on,  but  it  shows  that  even  if 
the  actual  existing  investments  in  land  were  accumulated  by  the  savings 
of  labor  and  capital  before  they  were  put  into  land,  this  fact  does  not 
entitle  the  present  owners  to  protection  from  loss  if  they  run  foul  of  a 
change  in  governmental  policy  under  the  taxing  power  or  the  police 
power. 

2.  As  to  the  claim  that  land  gets  the  exclusive  financial  benefit 
from  governmental  activities,  this  is  vigorously  denied  by  the  opponents 
of  the  proposed  measure.  While  it  is  admitted  that  land  gets  benefit 
from  governmental  expenditures,  it  is  claimed  on  the  other  hand  that  good 
schools,  adequate  police  protection,  health  service,  public  charities  parks 
etc.,  confer  financial  benefits  upon  all  individuals  in  the  city,  and  that 
therefore  everybody  should  be  called  upon  to  help  pay  for  these  ser- 
vices. Speaking  of  the  advantages  of  life  in  New  York  City  generally 
It  IS  urged  that  the  unearned  increment  shows  itself  in  higher  salaries 
greater  professional  earnings  and  increased  business  profits  as  well  a<=' 
increased  land  values.  It  is  contended  that  if  there  were  no  margin  of 
financial  benefit  in  coming  to  New  York,  not  absorbed  by  increased 
rents,  people  would  not  come  and  the  city  would  not  grow. 

But,  as  stated  in  the  summary  given  as  a  part  of  the  majority  report 
the  arguments  advanced  on  this  point  seem  to  destroy  each  other  In 
one  place  it  is  said  that  "the  opportunities  for  increased  income  grow 

L,t.  u  •  '^T  P'°P°"*°n  ^«  the  increase  in  land  values.  The 
greater  the  city  the  higher  the  wages;  the  greater  the  city,  the  higher 
me  profits  of  the  merchants  and  manufacturers,  and  the  greater  the 

43 


11! 
in 


if 


it 


,1 


:i 


income  Of  the  salaried  and  professional  classes."     In  another  place 

Thnn?  .'  n' •"""'"'  ^'  ^'^"^  "'"^^  '^^'  "  ^^^^^^^^  ^'^  ^^^ts  would  bring 
about  a  fall  ,n  wages,  ,t  is  said  that  "the  scale  of  wages  and  profes- 

smTll  "T^''  ''  '"'  '^^'^^  ^"  ^'^  ""''y  ^^  N^-  York  than  in  the 
small  neighbormg  towns,  and  the  difference  is  very  largely  measured  by  the 
difference  m  house  rents."  ^ 

Those  who  favor  the  measure  state  that,  of  course,  people  will  not 
come  to  a  cty  except  in  hope  of  increased  financial  profits  or  other 
advantages  deemed  equally  important,  but  that  they  do,  in  fact  have 
to  pay  for  these  financial  advantages  in  higher  ground  rents.  Everybody 
has  to  have  a  place  to  live  and  work,  and  for  that  place  he  pays  a 

^tllT  ^'^  """"T  ^^  '^'  ^'"'^'^  ^^"^^"^^  ^y  governmental  action. 
Havmg  paid  once,  he  ought  not  to  be  taxed  a  second  time  on  any 
margm  of  advantage  accruing  to  him.  It  is  not  just  to  tax  him  on 
the  increased  product  of  his  labor  while  the  tax  paid  in  rents  is  still 
unexhausted.    As  proof  that  the  land  gets  benefits  in  excess  of  the  total 

u'rbvThTar^'^' ''!'  '^^"^^'  ^"^  ^'^^  ^^^  ^^^-^^-  ^'  ^-^  -  -- 

more  than  tw"""'      I"  'T  "'  ^"  ^"^^^^^^"^  ^^^  '^'''  ^^^  -^^^ased 
tTe  oast  ten  ''  T'  ''  '^'  '"'^^  ''^^^^^^^  ^"  ^^^  P"^^^^  ^^^'  ^^"^g 

noslT  T  ^"^""'    I'  ''  "'^'^  *^"'  ^^'''  "^^^^^  allowance  for  any 
certainlvl:^^  '''  "'"  ''  assessments  to  real  values,  we  should 

certainly  find  a  large  margin  of  excess  in  the  increase  of  land  values 
over  the  increase  in  the  city's  debt.     And  so  it  is  urged  that  even  i 
ndividuals  do  receive  a  certain  surplus  of  the  financial^enefit  accruing 
from  governmental  expenditures,  the  initial  benefit  goes  to  land  and 
IS  a  community  benefit  which  is  more  than  ample  to  pay  all  the  expenses 

l'I?""b-  ."^'^^  '":'''  ^^^^^^  ^^  '^  ^^" '  ^^  ^^  -  evidenced  : 
city  has  reached  or  is  closely  approaching  the  economic  limit  of  its 

growth,  and  that  it  will  not  pay  for  it  to  get  any  larger. 

3.     No  direct  answer  is  made  to  the  contention  that  the  only  wav 

o  tax  present    and  owners  at  all  is  by  an  increase  in  the  tax  rL  on 

land,  but  It  is  claimed  that  if  the  tax  rate  is  raised  above  a  certain  poin" 

It  will  result  m  the  impairment  of  capital  values  and  that  tSwoS 

a^    classes  m  the  community  should  be  taxed.    They  ignore  the  argu! 

S  and  tha?  t];  '"'"  "  '''  community  is  already  taxed  by  the  land- 
lord and  that  the  proper  way  to  get  a  contribution  from  everybody  for 

for7wiSt:   r^'""  "  ?  If^^  ^  ^^^  ^"  ^^"^  -^-^  which'the  land^ 
lord  will  have  to  pay  out  of  the  ground  rents  already  collected  by  him 

I    >s  comnionly  stated  that  the  tax  on  land  must  be  paid  by  the  ownTr 

of  the  land  and  cannot  be  shifted  to  the  tenant,  but'the  opponems  o 

tax  and  tha  land  values  as  such  are  only  the  capitalized  privilege  of 
collecting  this  tax  from  the  tenants  and  keeping  a  portion  o^  it  iWad 
of  paying  it  all  over  to  the  government.    The  only  way  the  land  owner 

44 


as  such  can  be  made  to  bear  any  portion  of  the  tax  burden  is  by  taking 
away  from  him  a  larger  percentage  of  his  collections  than  he  figured  on 
when  he  bought  the  land,  or,  in  other  words,  when  he  invested  in  tax- 
collecting  privileges. 

4.  As  to  the  claim  that  there  is  a  land  monopoly  in  New  York, 
the  opponents  of  the  exemption  of  buildings  from  taxation  allege  that 
there  are  about  200,000  owners  of  real  estate  in  the  city  and  that  these 
owners  with  their  families  represent  a  million  people,  to  say  nothing 
of  the  individual  holders  of  mortgages  and  the  depositors  of  savings 
banks  and  the  policyholders  of  life  insurance  companies  whose  invest- 
ments are  largely  in  real  estate  loans.  They  say  that  under  these  cir- 
cumstances the  talk  of  a  land  monopoly  is  ridiculous.  To  the  allega- 
tion that  certain  families  have  enormous  land  holdings  they  reply  that 
these  families  now  have  to  pay  a  correspondingly  large  share  of  the 
taxes,  and  if  their  properties  are  left  vacant  or  unimproved  the  burden 
upon  them  is  relatively  heavier  because  their  income  from  rentals  is 
proportionately  less.  Moreover,  they  say  that  the  advantages  of  land 
ownership  in  New  York,  with  the  heavy  tax  already  imposed  on  land, 
do  not  constitute  a  special  privilege.  In  short,  they  maintain  that  there 
is  no  land  monopoly,  and  if  there  is,  it  is  an  unprofitable  one  which 
cannot  justly  be  saddled  with  a  special  burden  of  taxation.  To  these 
negative  arguments  it  may  be  replied  that  if  only  one-fifth  of  the 
families  of  the  city  have  any  direct  or  ascertainable  share  in  land  owner- 
ship, although  every  family  and  every  individual  uses  and  must  use 
land  all  the  time  as  a  base  of  operations,  this  fact  in  itself  proves  the 
existence  of  a  land  monopoly.  While  it  is  clear  that  in  New  York, 
where  land  values  are  so  enormous,  it  may  never  be  practicable  for  the 
majority  of  families  to  have  a  direct  share  in  land  ownership,  this  makes 
it  all  the  more  necessary  that  indirectly  everybody  should  share  in  the 
benefits  of  land  ownership  through  taxation.  The  use  of  the  term 
"monopoly"  moreover  is  proper  because  the  quantity  of  land  is  fixed 
and  its  ownership  is  subject  to  all  the  conditions  of  monopoly  ownership 
regardless  of  the  number  of  owners.  Things  capable  of  reproduction 
may  be  owned  by  one  person  without  that  person  being  the  owner  of 
a  monopoly  because  there  is  always  potential  competition.  On  the 
other  hand,  land  may  be  owned  by  millions  of  persons  and  yet  their 
ownership  is  a  monopoly.  It  is  for  this  reason  that  a  tax  on  land  cannot 
be  shifted  and  a  tax  on  things  capable  of  reproduction  tends  to  be 
shifted  to  consumers.  As  to  the  allegation  that  no  larger  profits  are 
made  in  the  real  estate  business  than  in  other  lines  of  business,  the 
opponents  of  the  proposed  measure  seem  to  confuse  land  speculation 
with  real  estate  development.  In  the  cities  of  Western  Canada  the  real 
estate  men,  those  engaged  in  the  development  of  land  for  use,  were  gen- 
erally in  control  of  the  municipal  governments  when  buildings  were 
exempted.    The  untaxing  of  buildings  is  not  calculated  to  kill  the  real 

45 


(J 


-I 

i 
I 


i'l    i 


?eve?on'reL?".r  ".'"'  '''  ^^^'^^  ^"  ^^^  ^^  ''  '^  -"^^erned  in  actual 
development  rather  than  mere  speculation  in  land  values. 

a  more  intend.'  '^'  '^''T  '^.''  '^'  ""'^^^^^  ^^  ^^^^^^^^^  would  tend  to 

coZct  c   V  7h  "''       '''"''^'  ^'"'^  ^"'  *^^  development  of  a  more 
compact  city,  there  ,s  no  substantial  difference  of  opinion.     However 

of  plr       f  ^'^"^  T'^  "^^^"^^^  ^^  ^^^  -^--^  improvement 
of  private  lands  previously  held  vacant,  would  more  than  offset  the 

economies  to  be  effected  in  other  ways,  and  that  street  congestion  and 

secTio'nTTth""  t""'  '""^  ^'^  overdevelopment  of  the'downtown 
TarceTs  of  L   r"^     more  intensive  development  of  the  most  valuable 

Lstion  hn^^  ^"^'  ^"  '"  "''"  '^""  "'  P^^^^"*'  *^^^  ^^"1^  "ot  be  con. 
faoadt;  ^f  .^^^:"^^^^^^"  ^"  the  basis  of  the  greatest  economy.  The 
capacity  of  the  streets  puts  a  limit  upon  the  intensive  use  of  land  at  the 
business  center  and  if  certain  property  owners,  by  building  skyscrapers 
vil  t        ^'f^'"^^"  ^^  th^  -^Pl-s  capacity  of  the  stfeets  in  their 

thT?^  "Z  '^"''  "'^^^^"'^  '^  '^'  maintenance  of  low  buildings, 

that  difficulty  can  be  solved  under  the  new  system  only  as  it  can  under 
the  old  namely,  by  the  limitation  of  the  heights  and  dimensions  of  build- 
ings  with  relation  to  lot  areas  and  street  widths.    The  necessity  for  such 
control  has  long  been  urgent  and  it  could  hardly  be  made  greater  by 
the  proposed  change  in  the  tax  plan.    The  opponents  of  the  proposed 
plan  to  untax  buildings  say  that,  in  any  event,  this  change  should  be 
preceded  by  a  system  of  zoning  and  limitation  of  building  heights.  They 
overlook  the  fact  that  plans  for  these  reforms  are  already  far  advanced 
and  can  be  put  into  effect  in  a  year,  while  the  untaxing  of  buildings  will 
take  a  series  of  years.    If  the  adoption  of  building  limitations  were  rec 
ognized  as  a  condition  precedent  to  the  untaxing  of  buildings,  the  oppo- 
nents  of  the  latter  would  doubtless  be  found  opposing  the  former 
effj'  .  ^PP^"^"ts  of  the  measure  are  divided  as  to  its  probable 

effect  upon   building  operations.     Some  think  that   it  would   start  a 
building  boom  which  would  last  until  the  city  was  overbuilt,  and  be 
o  lowed  by  a  severe  reaction.     Others  maintain  that  it  would  make 
real  estate  investments  so  hazardous  as  to  paralyze  immediately  the 
business  of  land  development.     They  say  that  money-lending  institu- 
ions  would  shut  down  tight,  or  that  the  rate  of  interest  would  be  raised 
so  as  to  bring  building  to  a  dead  stop.    The  wide  variation  in  the  views 
of  experienced  men  who  oppose  this  measure  tends  to  the  conclusion 
hat  in  all  probability  the  effect  of  its  adoption,  so  far  as  building  opera- 
tions  are  concerned,  would  be  a  mild  stimulation  which  would   lead 
neither  to  a  boom  nor  to  immediate  or  future  paralysis. 

7.  The  opponents  of  the  measure  minimize  its  probable  effect  on 
rents  They  generally  maintain  that  the  reduction  in  rentals  would  be 
small,  while  at  the  same  time  insisting  that  the  effect  upon  land  values 

46 


would   be  disastrous.     The  seeming  discrepancy  in   this  argument  is 
explained  in  part  by  the  claim  that  confidence  is  the  basis  of  land  values 
and  that  such  a  measure  as  this,  even  though  it  did  not  reduce  the  earn- 
ing  power  of  land,  would  so  undermine  the  confidence  of  the  investing 
public  as  to  greatly  reduce  the  selling  value  of  land.    It  is  also  explained 
in  part  by  a  misapplication  of  well-established  economic  principles.    Par- 
ticular dependence  is  placed  on   Dr.   Haig's  analysis  of  the  probable 
effects  of  the  proposed  plan  as  applied  to  New  York  conditions,  in  which 
he  maintains  that  the  maximum  reduction  in  rents  obtainable  by  the 
tenants  in  any  given  building  as  a  direct  result  of  the  change  in  the 
taxing  system  would  be  the  amount  of  the  tax  taken  off  the  building, 
and  that  the  probable  decrease  in  the  value  of  the  land  would  be  the 
amount  of  the  increase  in  the  tax  on  the  land  as  such,  capitalized.    The 
fallacy  lies  in  the  assumption  that  the  shifting  of  the  tax  on  buildings 
to  the  tenants  is  in  any  degree  a  direct  process,  independent  of  competi- 
tion.   This  assumption  is  in  direct  conflict  with  the  accepted  theory  of 
the  incidence  of  the  tax  on  buildings,  which  is  that  the  tax  is  shifted  to  the 
tenants   through   the   curtailment   of   competition   and   likewise   that    any 
decrease  in  the  tax  is  passed  on  to  the  tenants  in  the  form  of  lower 
rents   through  the   encouragement  of  competition.      Except    for   competi- 
tion, neither  the  increase  nor  the  decrease  in  the  amount  of  taxes  levied 
on  buildings  would  affect  rents  at  all.    The  land,  as  the  residuary  legatee 
of  the  buildings,  would  absorb  all  the  injury  or  the  benefit.    But  with 
competition,  the  aggregate  amount  of  the  taxes  taken  off  buildings  bears 
no  ascertainable  relation  to  the  aggregate  amount  of  the  saving  due  to 
a  decrease  in  rents.    In  like  manner,  Dr.  Haig  draws  a  fallacious  conclu- 
sion as  to  the  effect  of  the  proposed  plan  on  land  values.    Assuming  that 
the  tenants  will  get  the  benefit  of  the  reduction  in  the  taxes  on  buildings, 
he  necessarily  follows  this  assumption  with  another,  namely,  that  the 
selling  price  of  a  given  parcel  of  land  will  be  decreased  by  the  capital- 
ized amount  of  the  increase  of  the  taxes  levied  directly  upon  it.     It 
seems  clear  that  if  rents  are  not  reduced  and  if  the  total  amount  of  the 
tax  payable  on  the  land  and  the  building  together  is  decreased,  the  value 
of  the  land  will  tend  to  rise,  no  matter  what  the  nominal  rate  of  taxa- 
tion applied  to  the  land  value  as  such  may  be.     Thus  the  direct  effect  of 
the  transfer  of  the  tax  should  be,  not  a  decrease  in  the  aggregate  selling 
value  of  all  land,  but  a  readjustment  of  land  as  between  improved  and 
unimproved  or  underimproved  parcels.    The  decrease  in  the  aggregate 
selling  value  of  land  would  be  brought  about  only  by  a  reduction  in 
the  aggregate  amount  of  net  rentals  actually  or  prospectively  paid,  and 
this,  as  we  have  already  seen,  will  be  brought  about  only  through  a 
lowering  of  rents  resulting  from  the  competition  of  new  buildings,  which 

properly  may  be  regarded  as  one  of  the  indirect  effects  of  the  proposed 
plan.  ^    ^ 

The  opponents  of  the  measure  also  maintain  that  real  estate  own- 
ers, under  present  conditions,  usually  depend  on  expected  increases  in 

47 


( 


If 

|i 
J!' 

if 


>■ 


!ii; 


i  . 


i 


the  value  of  their  land  to  offset  the  depreciation  in  their  buildings,  and 
that  therefore  depreciation  is  not  now  included  in  rents.  They  claim 
that  the  effect  of  the  exemption  of  buildings  from  taxation  would  be 
to  decrease  land  values,  or  at  the  very  least  to  prevent  or  seriously 
check  their  increase.  They  maintain  that  the  result  would  be  to  compel 
owners  to  add  depreciation  to  the  rentals  charged  their  tenants.  It 
may  be  urged  in  reply,  that  the  increase  in  rentals  due  to  this  cause 
would  not  in  any  event  more  than  offset  the  decrease  due  to  a  shrinkage 
in  land  values,  unless  land  owners  are  now  playing  a  losing  game. 
Depreciation  is  a  legitimate  part  of  the  cost  of  furnishing  building 
accommodations,  and  not  to  provide  for  it  is  poor  business  policy  for 
everybody  concerned.  The  analogy  of  the  public  utilities  holds  good 
here.  It  is  for  the  ultimate  interest  of  both  investors  and  users  that 
depreciation  should  be  provided  for  as  it  accrues.  No  matter  what  the 
effect  on  rents  may  be,  it  certainly  would  be  a  great  advantage  to  real 
estate  owners  if  they  were  compelled  to  provide  for  depreciation. 

8.  As  to  unemployment  and  wages,  the  opponents  of  the  measure 
maintain  that  the  reduction  of  unemployment  and  the  increase  of  wages 
through  scarcity  of  labor  could,  in  any  case,  last  only  through  the 
period  of  the  boom  in  building,  should  one  ensue,  and  that  as  soon  as 
things  had  reached  a  new  equilibrium  unemployment  would  reappear 
and  wages  settle  back  to  their  old  level.  Moreover,  they  claim  that 
high  rents  make  high  wages  and  that  if  rents  should  be  lowered,  wages 
would  have  to  fall  with  them,  all  according  to  the  iron  law  formulated 
by  Ricardo.  In  reply  to  this  claim,  the  advocates  of  the  measure  main- 
tain that  the  effect  of  the  exemption  of  buildings  from  taxation  would 
not  exhaust  its  force  in  an  immediate  riot  of  building  activity,  but  would 
be  a  continuing  incentive  to  a  liberal  building  policy.  Furthermore,  as 
to  wages,  attention  is  called  to  the  modification  of  Ricardo's  law  effected 
by  the  unions.  With  wages  once  up,  organized  labor  can  be  depended 
upon  to  maintain  them,  certainly  during  periods  of  reasonable  prosperity. 
In  any  case,  the  workingmen  would  share  in  the  general  prosperity  of  the 
city,  and  would  not  have  to  pay  their  taxes  twice — once  in  ground  rents 
and  a  second  time  in  house  rents  and  the  prices  of  commodities. 

9.  As  to  the  building  of  small  houses  or  any  other  kind  of 
houses,  opponents  of  the  measure  foresee  dire  consequences  from  its 
adoption.  They  claim,  but  have  not  proven,  that  there  are  some  200,000 
land  owners  in  the  City  of  New  York,  and  that  the  equities  of  a  very 
large  proportion  of  these  owners  would  be  wiped  out  by  the  shrinkage 
in  land  values.  They  claim  that  a  panic  would  ensue  upon  the  adoption 
of  the  policy  of  untaxing  buildings,  that  existing  mortgages  would  be 
called,  that  new  loans  would  not  be  made,  that  in  any  case  the  neces- 
sity of  intensive  development  would  multiply  large  tenement  and  apart- 
ment houses,  that  the  heavier  tax  on  land  would  banish  gardens  and 
lawns  from  the  city,  and  that  home  owners  who  now  depend  on  the 

48 


expected  increase  in  the  value  of  their  lands  to  pay  off  their  mortgages 
would  be  deprived  of  this  support.  They  ignore  entirely  the  benefits 
to  the  small  householder  whose  improvement  is  usually  worth  two  or 
three  times  the  value  of  his  land.  On  the  matter  of  home  ownership. 
Dr.  Haig  makes  these  significant  comments: 

"The  cities  of  Western  Canada  show  a  large  percentage  of  home 
owners.  Certainly  the  tax  system  has  not  prevented  home  ownership 
on  a  large  scale.  Probably  it  has  encouraged  it.  The  decreased  carry- 
ing charge  is  an  item  which  appeals  to  the  man  in  moderate  circum- 
stances. It  should  be  remembered,  however,  that  under  the  conditions 
present  in  Canadian  cities  the  reduction  of  the  tax  on  buildings  has  been 
a  net  reduction  in  taxes  payable  on  residence  property,  the  weight  of 
the  burden  being  largely  assumed  by  the  vacant  and  underimproved  real 
estate." 

So  far  as  the  wiping  out  of  equities  is  concerned,  there  is  no  good 
reason  to  believe  that  it  would  take  place,  except  possibly  in  a  few 
isolated  instances  where  the  equity  is  a  very  narrow  one  or  the  shrinkage 
of  the  particular  parcel  substantial.  But  even  if  there  should  be  a  gen- 
eral decrease  in  land  prices,  the  effect  upon  the  small  owner  would  cer- 
tainly be  very  much  less  serious  than  the  opponents  of  this  measure 
predict.  Small  home  owners  with  mortgages  on  their  property  would 
not  suffer  foreclosure.  With  the  decreased  tax  charges  they  would 
be  in  a  better  position  than  before  to  pay  off  their  mortgages,  and  when 
they  had  them  paid  would  be  in  possession  of  property  which  for  pur- 
poses of  actual  use  would  be  at  least  as  valuable  as  it  is  now.  All  they 
could  possibly  lose  would  be  the  theoretical  reduction  in  value  due  to 
the  elimination  of  the  speculative  element  in  the  value  of  their  land 
based  upon  its  prospective  theoretical  net  income  on  a  hypothetical  rental 
basis.  They  would  not  have  to  pay  any  more  to  complete  their  purchases 
than  they  would  have  to  pay  under  existing  conditions,  and  they  would 
be  in  a  better  condition  to  pay  it.  As  to  the  limitation  of  garden  space, 
it  seems  clear  that  the  intensive  development  of  the  downtown  centers, 
where  gardens  do  not  belong  anyhow,  would  tend  to  relax  the  demand 
for  and  diminish  the  price  of  outlying  lands  must  suitably  located  for 
garden  purposes.  Gardens  would  undoubtedly  stick  to  the  fringe,  and 
would  be  pushed  gradually  further  out  as  the  intensively  developed 
business  center  expanded.  As  to  increased  congestion  on  account  of 
the  more  intensive  development  of  the  land,  it  is  to  be  remembered  that 
the  tendency  to  intensive  development  affects  only  the  more  expensive 
centrally  located  sites,  and  the  value  of  these  sites  would  be  checked 
by  the  competition  of  cheaper  sites  for  separate  houses.  As  to  the 
dependence  of  home  owners  on  the  future  increment  in  land  values  to 
liquidate  their  mortgages,  it  is  clear  that  an  increase  in  land  value  will 
not  actually  pay  off  a  mortgage  unless  the  land  is  sold.  This  brings 
the  home  owner  who  depends  upon  the  increment  into  the  speculative 
class.  No  convincing  evidence  has  been  produced  to  show  that  the 
mechanics  and  small  home  owners  in  building  and  loan  associations 

49 


II 


I 


—    -4 


w 


I 


H 


1^ 


belong  in  this  class.  Moreover,  the  testimony  of  those  opposed  to  the 
untaxing  of  buildings,  if  true  as  to  the  average  profits  from  real  estate 
speculation,  would  tend  to  show  that  this  is  no  sort  of  business  for  a 
poor  man  to  indulge  in.  When  this  consideration  is  combined  with  the 
fact  that  in  selHng  lots  and  houses  the  realty  development  companies 
usually  succeed  in  capitalizing  any  foreseeable  increment  in  value,  it 
seems  clear  that  prospective  increases  in  land  value,  while  good  talking 
points  for  the  salesmen,  cannot  safely  be  relied  on  by  buyers  for  the 
payment  of  their  mortgages. 

lo.  The  opponents  of  the  measure  do  not  deny  that  if  rents  fell 
and  buildings  multiplied  the  effect  might  be  to  attract  more  population 
to  the  city,  but  they  allege  that  if  this  should  happen  it  would  immedi- 
ately increase  rents  again,  increase  land  values  and  stimulate  specula- 
tion, thus  depriving  the  people  of  the  very  advantages  claimed  as  result- 
ant from  the  adoption  of  this  plan.  However,  they  do  not  pay  attention 
to  the  fact  that  values  restored  on  the  basis  of  larger  population  and 
more  intensive  use  would  be  real  values,  and  nobody  would  be  injured 
by  them.  The  advocates  of  the  measure  do  not  claim  that  rents  can 
be  reduced  indefinitely.  They  recognize  that  as  cities  grow  and  the 
demand  for  locations  increases,  rents  must  go  up  to  correspond  with 
the  more  intensive  use  and  the  greater  value  of  particular  sites.  What 
they  do  claim  is  that  rents  at  the  present  time  contain  an  element  of 
fictitious  value  based  on  the  speculative  factor  in  the  value  of  land, 
flhey  also  point  out  that  if  the  plan  does  result  in  bringing  more 
industries  and  more  people  to  New  York  with  the  effect  of  stiffening 
land  values  and  increasing  rents,  at  least  the  prognostications  of  disaster 
given  out  by  the  opponents  of  the  measure  will  not  be  fulfilled.  In 
regard  to  land  speculation,  the  opponents  of  the  measure  say  that  human 
nature  is  unchangeable,  and  that  the  only  eflFect  of  the  measure  would 
be  to  scale  values  down  a  certain  amount  to  a  new  base  line,  from 
which  speculation  would  be  resumed  as  vigorously  as  ever.  They 
ignore  the  fact  that  the  increased  rate  of  taxation,  applying  to  increases 
in  value  as  well  as  to  existing  values,  would  tend  to  retard  the  increase 
in  value  and  reduce  its  amount.  Thus,  even  if  the  full  effect  of  the  pro- 
posed plan  could  be  discounted  in  order  to  form  a  new  base  line  of 
values  for  speculative  purposes,  the  stakes  would  thereafter  be  smaller 
and  the  incentive  to  speculation  correspondingly  less. 

The  objections  to  the  plan,  most  strenuously  advanced  by  its  oppo- 
nents, in  so  far  as  they  have  not  been  fully  stated  in  connection  with  the 
preceding  discussion,  are  the  following: 

ALLEGED    OBJECTIONS    TO    THE    EXEMPTION    OF    BUILDINGS 

FROM  TAXATION. 

(a).  It  is  claimed  that  the  plan  would  result  in  the  confiscation  of 
a  portion  of  the  capital  value  of  land,  and  that  it  is  therefore  both 
unjust  and  dishonest. 

60 


(b).  It  is  predicted  that  the  adoption  of  the  plan  would  bring  on 
a  terrible  real  estate  panic,  in  which  multitudes  of  small  investors  would 
lose  their  all,  the  great  financial  institutions  which  have  their  money 
invested  in  real  estate  mortgages  would  be  shaken  to  their  foundation, 
improvements  would  stop,  taxes  would  be  largely  uncollectible,  and 
the  city  and  its  people  would  pass  through  a  period  of  great  inconven- 
ience and  suflFering.  Nobody  would  invest  in  real  estate,  and  real  estate 
speculation,  one  of  the  most  necessary  and  productive  occupations, 
would  be  suspended.  The  alleged  land  monopoly,  now  non-existent, 
would  become  a  reality  as  an  outgrowth  of  the  ruin  of  the  small 
investors. 

(c).  It  is  pointed  out  that  the  city's  tax  rate,  except  for  the  debt 
service,  is  limited  to  two  per  cent,  of  the  assessed  valuation  of  taxable 
real  and  personal  estate,  and  it  is  predicted  that  the  adoption  of  this 
plan,  with  the  resultant  depression  in  land  values,  would  force  the  tax 
rate  up  beyond  the  constitutional  limit. 

(d).  It  is  pointed  out  that  the  city's  net  indebtedness,  excluding 
exemptions,  is  hugging  the  constitutional  debt  limit  of  ten  per  cent,  on 
the  assessed  valuation  of  real  estate,  and  that  a  small  shrinkage  in 
land  values  would  wipe  out  the  margin  of  credit  entirely,  and  put  the 
city  in  a  position  where  it  could  not  borrow  a  penny  for  general  public 
improvements,  no  matter  how  pressing  the  necessity  might  be. 

(e).  It  is  urged  that  the  adoption  of  the  proposed  plan,  no  matter 
in  how  mild  and  tentative  a  form,  would  be  a  step  in  the  direction  of 
the  single  tax,  would  admit  its  principle  and  would  probably  lead  to 
its  ultimate  adoption  in  toto.  This  is  regarded  as  an  inconceivably  bad 
outlook,  to  which  not  more  than  one-one-hundredth  of  one  per  cent,  of 
the  population  of  the  city  (some  530  people)  would  at  the  present  time 
be  willing  to  give  assent. 

(f).  It  is  urged  that  however  well  this  plan  might  work  in  a  new 
community,  it  ought  not  to  be  put  into  effect  in  New  York  City  the 
financial  metropolis  of  the  New  World,  with  its  immense  vested  inter- 
ests and  Its  delicate  relations  with  the  commerce  and  finance  of  the 
entire  country,  certainly  not  until  it  has  been  thoroughly  tried  out  and 
proven  good  in  smaller  communities.  If  experiments  must  be  made, 
let  them  not  be  made  here. 

(g).  Finally,  it  is  urged  that  if  the  plan  is  to  be  put  into  effect  at 
all,  It  should  be  put  into  effect  on  a  rising  real  estate  market,  where 
the  shock  can  be  absorbed.  It  is  maintained  that  now,  of  all  times 
would  be  the  worst  time  to  inaugurate  the  plan  in  New  York,  with  real 
estate  in  the  trough  of  a  wave,  with  the  city's  financial  needs  expanding, 
and  with  the  demand  for  new  sources  of  revenue  acute. 

These  are  serious  objections  which  were  urged  upon  the  Commit- 
tee with  deep  conviction  and  great  insistence.  To  them  the  advocates 
ot  the  plan  make  the  following  answers : 

51 


I 


I 


j 


I  ,1 

li 


il 


II  I 


! 


il 


M« 


I     J:t 


f 


' 


( 


HOW  THE  OBJECTIONS  ARE  ANSWERED. 

(a).  As  to  the  confiscation  argument,  it  is  pointed  out  that  any 
other  form  of  taxation  is  a  species  of  confiscation.  It  is  urged  that 
when  additional  revenue  is  needed  to  pay  the  expenses  of  the  govern- 
ment, the  least  offensive  form  of  confiscation  is  to  take  for  community 
uses  a  portion  of  the  value  created  by  the  community  and  temporarily 
the  subject  of  private  investment.  It  would  be  much  more  unjust  to 
confiscate  the  individual  products  of  labor  and  capital  or  the  income 
from  labor  and  capital.  If  the  taking  of  an  additional  portion  of  the 
annual  earnings  of  land  sites  is  unjustifiable  confiscation,  what  is  to 
be  said  of  the  taking  of  a  percentage  of  a  man's  income  or  salary,  or  of 
the  addition  of  an  excise  tax  to  the  prices  he  pays  for  goods?  It  is 
urged  with  great  force  by  some  that  land  values  are  not  an  appropriate 
subject  for  private  ownership  and  never  were,  that  they  belong  to  the 
community  at  large,  and  that  present  owners,  no  matter  what  their 
actual  investments  may  be,  are  in  the  position  of  men  who  have  bought 
"stolen  goods."  It  is  not  necessary  to  take  this  extreme  position.  We 
may  admit  that  private  property  in  land  values  has  been  sanctioned  by 
modern  law  and  custom,  and  that  the  owners  of  land  are  no  more  repre- 
hensible than  the  owners  of  anything  else.  But  even  if  we  admit  all 
this,  it  is  clear  that  the  plan  here  under  discussion  would  not  affect 
vested  interests  in  land  so  seriously  as  to  differentiate  it  from  other 
fiscal  measures  and  governmental  policies  that  are  never  questioned  on 
moral  grounds.  For  example,  right  under  our  very  eyes  the  city,  by 
its  deliberately  adopted  rapid  transit  policy,  is  spending  vast  sums  of 
money  for  improvements  which,  it  is  known  in  advance,  will  destroy 
values  in  certain  sections,  and  create  them  in  others.  The  city  is  mak- 
ing some  men  poor  while  it  makes  others  rich,  and,  what  is  more, 
is  making  those  who  are  injured  by  them  help  pay  for  the  improve- 
ments that  are  destroying  their  property.  In  fact,  there  is  reason  to 
believe  that  the  present  unsettled  condition  of  real  estate  and  the 
depression  of  values,  particularly  in  Manhattan,  of  which  we  have  been 
reminded  so  insistently,  are  not  so  much  due  to  any  increase  in  taxation 
as  to  these  very  public  improvements  in  transit  to  which  the  city  has 
committed  itself.  The  proposed  plan  would  doubtless  cause  a  mild 
readjustment  of  values,  but  this  readjustment  would  tend  to  offset  and 
correct  the  tremendous  shaking  up  now  going  on,  by  checking  the  rise 
in  value  of  vacant  suburban  lands  and  by  checking  the  fall  in  value  of 
improved  lands  in  older  sections  of  the  city  just  outside  the  central 
business  district. 

(b).  As  to  the  claim  that  the  adoption  of  the  proposed  plan  would 
bring  on  a  real  estate  panic,  the  advocates  of  the  measure  maintain  that 
this  fear  is  wholly  imaginary.  They  point  out  that  the  change  proposed 
is  less  radical  than  the  change  effected  without  harm  some  years  ago 
when  the  standard  of  assessments  was  changed  so  as  to  bring  vacant 

52 


y 


land  on  a  parity  with  improved  lands.    It  is  stated  that  improved  lands 
were  jumped  from  a  60  per  cent,  to  a  100  per  cent,  valuation,  while 
vacant  lands  were  jumped  from  a  30  per  cent,  to  a  100  per  cent,  basis 
at  the  same  time.     No   panic   followed,  and  even  the  opponents  of  the 
present  plan  admit  that  the  change  then  effected  was  both  just  and 
expedient     It  has  not  been  made  clear  just  what  is  meant  by  the  pre- 
dicted refusal  of  people  to  invest  in  real  estate,  or  the  evil  effects  that 
would  follow  therefrom.    It  is  clear  that  the  land  itself  will  not  run  away 
or  slip  into  the  sea  merely  because  investors  refuse  to  "hold"  it.     It 
will  remain  right  where  it  is  and  its  potential  usefulness  will  in  no 
way  be  diminished.    The  same  is  true  of  existing  buildings.    They  can- 
not run  away  and  they  will  not  fall  down  or  disappear  until  they  are 
worn  out  or  destroyed.    As  to  new  buildings,  while  there  was  a  marked 
diflFerence  of  opinion  among  the  opponents  of  the  measure  as  to  what 
its  effect  would  be,  the  great  weight  of  the  entire  testimony  at  the 
hearings  and  of  the  opinions  expressed  in  the  Committee's  own  discus- 
sions pointed  to  an  increase  in  the  number  and  size  of  buildings.    If  this 
increase  should  materialize,  the  argument  that  nobody  would  invest  in 
real  estate  falls  to  the  ground  so  far  as  buildings  are  concerned.     Even 
the  radical  advocates  of  the  measure  admit  that  the  immediate  transfer 
of  the  total  tax  now  levied  on  buildings  to  land  values  would  cause 
considerable  hardship  and  perhaps  temporarily  unsettle  business  condi- 
tions.   But  nobody  proposes  to  make  the  change  in  a  shorter  period  than 
ten  years  or  by  steps  more  radical  than  ten  per  cent,  per  annum. 

In  regard  to  this  general  point,  Dr.  Haig  reports  from  Western 
Canada : 

"There  is  general  agreement  that  the  special  land  taxes  had  no 
unfavorable  effects  upon  credit  conditions.  Loanable  funds  have  not 
been  withheld  or  mortgages  foreclosed  to  any  considerable  degree 
because  of  the  pressure  of  the  tax  system." 

While  he  pointed  out  that  certain  conditions  as  to  loans  prevail 
in  the  Canadian  cities  which  do  not  prevail  to  the  same  extent  in  New 
York,  the  Committee  had  the  benefit  of  the  testimony  of  Mr.  Richard 
M.  Hurd,  a  profound  student  of  New  York  land  values  and  president  of 
one  of  the  great  loaning  institutions  of  the  city,  who  stated  that  in  his 
opinion  credit  conditions  on  the  whole  would  be  improved  as  a  result 
of  the  untaxing  of  buildings,  if  this  policy  were  carried  out  in  connection 
with  a  comprehensive  town-planning  scheme  to  limit  the  height  of 
buildings  and  stabilize  values  by  a  proper  zoning  system.  As  a  lender, 
he  expressed  himself  as  opposed  to  very  high  land  values,  and  as  believ- 
ing that  a  moderate  reduction  in  them  would  benefit  the  loan  market. 
He  saw  no  reason  to  expect  a  panic  as  the  result  of  the  adoption  of  the 
new  tax  plan. 

So  far  from  starting  a  panic,  it  is  probable  that  the  adoption  of 
this  measure  would  administer  a  corrective  to  the  depression  already  on 

53 


*  • 


our  hands,  which  has  been  broueht  on  for  tt.»  «,^^*        .  u 

other  than  taxation     Certain^v   if  fL    \  ''"'  ^^  ""'"  'l"'*' 

t»,^=»      t,  ^-ertainly,  if  the  plan  were  once  put  into  effect 

would  "h/.^T  """"'^  '*'  ""''  P'^^'^*  ^^^l'  disastrous  results  fromi  ' 
prove' ttip^oS  1P^^.^'"P^^^""  -  artificially-engendered  pan"  o 
llZl       Z  ^  Loaning  institutions  would  certainly  be  very  slow 

about  uistuuting  a  general  call  of  mortgages.    There  wou'.d  .Z^fZ 

.and^jiluefwirintrtlVaV 

.tiJMe^rr-  Lt  ''b-r  T  -^^^^^^ 

raised  for  city  pu^r^t  ^Zt  KtarJ^^  Z^ZT  ''. 
^es^^  are  and  .^ ^ain  ^n^ Xlrot!  d^  ZZZ  ^ 

tion  o  ,.„,  ..,„,,  it  is  Pointerorb;nhr  arott's  of^;;!:x^^^^ 

h     debt  service,  amounting  to  about  one-third  of  the  toU    fax  levy 
falls  outs.de  the  two  per  cent,  limit,  and  that  therefore  the  tax  rl'e  couM 

through  to  its  full  extent      l^Ui.  ^A      '  ^   *"^   P^^" 

Plan  L  with  fai;ri,  i^uxt  si'.^x  ^zis^s^j^ 

tures  outs.de  of  the  debt  service  approached  the  two  per  ce„t  hmh  to 
secure  any  constitutional  changes  that  might  be  conside  d  nece  sT  v  or 
desirable.    It  is  pointed  out,  moreover  that  tt,»  ,^,  a     ,^^^^y  °^ 

direct  relation  to  an  increa.  ^ZT.^:!  Z^^TL^^.^LZ 
from  real  estate.    While  some  of  the  advocates  of  tt,.  li  •  ^°^T    '^ 

the  levying  of  all  additional  taxes  n:::^Z'.lt^r,::^,::Z 
o  do  so  ,s  not  a  part  of  this  proposition,  and  if  it  were  thoughTiest  ^^ 

rea    estate  to  the  relative  amount  now  raised  from  this  source    «,<.!,  . 
policy  would,  in  itself,  prevent  the  tax  rate  on  land  under  ^Slnto 
posed  from  exceeding  the  two  per  cent,  limit.    The  merits  of  t.  is  partkT 
la    plan  are  not  necessarily  dependent  upon  the  theory  that  a  1  adE^^j 
burdens  of  taxation  should  be  laid  upon  land.  aad.t.onal 

,.«  ^Il"    ^t  *°  ^^^  ^'^''"  *''^*  ^^'^  untaxing  of  buildings  would  so  de- 
press the  value  of  real  estate  as  to  wipe  out  the  city's  margin  of  cred! 
under  the  constitutional  debt  limitation,  it  is  maintained  t^Lt  the  oro 
posed  plan  contemplates  carrying  buildings  on  the  assessment  roll  at" 
their  full  value  as  a  part  of  the  property  base  for  the  city's  credk     h 
•3  pointed  out  that  there  is  no  reason  to  expect,  as  a  direct  effect  S  the 

54 


proposed  plan,  any  immediate  reduction  in  the  aggregate  value  of  land, 
but  only  a  shifting  of  value  from  vacant  land  to  improved  land.     If. 
however,  as  expected  and  hoped,  the  indirect  effect  of  the  plan  would 
be  to  eliminate  in  large  part  the  existing  speculative  element  in  the  value 
of  land,  this  would  only  be  done  by  the  increase  in  the  value  of  build- 
ings which  would,  at  least,  partially  offset  the  decrease  in  the  value  of 
the  land  itself.     Moreover,  this  speculative  element  in  land  values  has 
even  yet,  at  least,  in  many  parts  of  the  city,  not  been  fully  assessed. 
Furthermore,  with  the  increase  of  population  and  business,  as  already 
pointed  out,  the  value  of  the  land  itself  would  be  restored  and  the  ag- 
gregate value  of  buildings  would  be  greatly  increased.     It  is  admitted, 
however,  that  the  city's  present  debt  margin  is  very  narrow  and  that 
the  fluctuations  in  value  now  going  on  as  a  result  of  subway  expansion 
and  the  general  real  estate  depression  may  be  sufficient  to  wipe  out 
this  margin  entirely.    The  proposed  plan,  if  introduced  gradually,  would 
not  add  materially  to  the  existing  shrinkage  and  might,  as  already  shown, 
partially  check  the  violent  readjustment  now  going  on  and  tend  to  re- 
store stability  of  values.     It  is  urged,  however,  that  even  if  the  debt 
margin  should  be  wiped  out  as  a  result  of  the  introduction  of  the  pro- 
posed plan,  no  disastrous  effects  would  follow.    It  is  commonly  believed 
that  the  city  is  now  suffering  from  extravagance  in  expenditures  and 
especially  from  extravagance  in  past  years  in  the  piling  up  of  debt 
against  the  future.     The  pay-as-you-go  policy  recently  instituted  by 
the  Board  of  Estimate  and  Apportionment  is  sound  in  theory  and  neces- 
sary in  practice.     Land  has  temporarily  benefited  in  the  past  by  the 
postponement  of  legitimate  burdens  until  a  future  time.     The  day  of 
reckoning  has  now  come,  and  while  it  may  be  burdensome  upon  the 
present  owners  of  real  estate  to  pay  for  the  dead  horse  whose  services 
they  enjoyed  for  less  than  cost  while  it  was  alive,  it  cannot  be  said  that 
this  burden  is  unjust  or  other  than  inevitable.     Moreover,  every  dollar 
that  is  paid  in  taxation  to  prevent  the  incurring  of  debt  is  a  double  ad- 
vantage to  real  estate.    In  the  first  place,  it  subjects  public  expenditures 
to  a  much  more  severe  test  of  economy  and  necessity  than  is  possible 
where  borrowed  money  is  being  spent.    In  the  second  place,  it  strength- 
ens the  foundations  of  public  finance,   increases  the  city's  assets  and 
decreases  the  future  burden  upon  the  taxpayers.     Both  as  a  matter  of 
justice  and  as  a  matter  of  good  business  policy  the  land  owners  should 
not  object  to  the  severe  limitation  of  the  city's  borrowing  habits. 

In  any  case  the  city's  outstanding  obligations  will  not  be  impaired 
and  the  stocks  and  bonds  already  issued  will  have  as  good  security  as 
ever.  The  constitution  is  perfectly  clear  on  this  point  and  there  is  no 
excuse  for  any  misunderstanding  or  misstatements  in  regard  to  it. 
The  section  of  the  constitution  limiting  municipal  debt  specifically  pro- 
vides that  "no  indebtedness  of  a  city  valid  at  the  time  of  its  inception 
shall  thereafter  become  invalid  by  reason  of  the  operation  of  any  of  the 

55 


f 


provisions  of  this  section."  Whatever  eflFect  the  proposed  plan  might 
have  upon  the  city's  borrowing  capacity  it  would  apply  only  to  The 
future  and  as  already  pointed  out,  the  absolute  stoppage  oaS  „! 
crease  in  the  city's  debt,  especially  at  this  time,  might  be  a  blessing 
to  everybody  concerned  rather  than  a  calamity  ^ 

ing  wed  J?or^'he'?  'K'"""  T""'''  P'""  "°"'^  ^^  °"'y  -"  -ter- 
mg  wedge  for  the  Single  Tax,  the  principle  of  which  is  approved  bv 

tht\.     '"5"'*^"'"^'  P^°P-t'°"  °f  the  people,  the  reply  is  made  tha^ 

his  plan  does  not.  in  itself,  commit  the  city  even  to  the  principle  o 

the  Single  Tax.  and  that  as  the  exemption  of  buildings  is  to  b"  b  ou.ht 

the°  Sin°?T'"'"^""'  "  '^J  ^^^"'^^  "^  unsatisfactory'and  ^e  peo    e  fe 

year  ^nd  eJblT ?"?H  '^7.  "'"  ''""  *'^  P^°^^^'  "^^  ^^  legisLion  an" 
year  and  go  back  to  the  old  system  or  stay  where  they  are  at  the  time 

f  boun    t:LTF  ""-^^  ""^  'I  '''  ""^^""  ^"•'"  i'no  prlnh   Te 

he  ve^y  feir  ^f  the""'"'  """VT  *'''*  ""'  "'"  ^^*  '^'''-     ^"deed. 
tne  very  fear  of  the  opponents  of  this  plan  that  once  it  be^an  to  h. 

"n  thatTh    '  '1'  "'/'r^'^  '°  '''^  Single  Tax  seems    ike'a  confet 
sK,n  that  the  results  of  the  plan  would  commend  themselves  to  the  oeo 
pie,  and  surely,  in  this  democratic  country,  the  opponents  of  the  oLn 
would  not  maintain  that  the  people  ought  not  to  be  trusted  to  de'ter 

"nno  °L  kled  b"  'Ir  '""'^'"^"*^'  ^^""^^  °^  government     The  phn 
cannot  be  killed  by  calling  it  an  entering  wedee  for  the  qinori.  t- 

now  exists  in  New  vTu     !'  ,-   ^  ""'''*  °^  ^  depression  such  a« 

forTes  ev  n  sLnl^^That  tl  V""''""  *''*  '"  '^^^  **«•"  ^''^  ^'^er 
^ca  even  stronger  than  taxation  are  at  work  thp  Qr^r^i^i  -.^a 

be  no  better  time  than  in  the  midst  of  a  depression  to  begin  putt.ne 
hi    plan  in  o  operation.    It  would  gently  stimulate  building  and  thus 
revive  legitimate  real  estate  development      It  is  ur^ed  th  5  T       . 

L  Them  th  '■"  °" ;"'  ^^'"^^  -°""^  '^  to\;e:r  ouf  eXat:  ^ 

m  them,  their  speculative  as  distinguished   from   their  use  elements 
When,  in  the  midst  of  a  depression,  these  speculative  elements  a  eTarJ. 
ly  absent  any  way.  the  new  system  would'have  a  less  dTsturlng  efffct" 
and  cause   ess  distress  than  would  be  the  case  in  normal  times     Mo  ' 
over,  as  already  argued,  the  plan  might  well  have  tl  effTct  of  mk  " 
fating  the  violence  of  the  readjustments  in  values  now  going  on    ai^d 
If.  as  many  realty  operators  assert,  the  real  estate  business  is  oil  the 
verge  of  a  healthy  revival,  the  effect  of  the  proposed  plan  might  wdl 

56 


be  slightly  to  retard  and  hold  in  check  the  upward  movement  so  as  to 
prevent  it  from  assuming  boom  proportions.  In  other  words,  a  heavy 
tax  on  land  is  as  steadying  as  it  is  inescapable.  The  violent  increases 
and  decreases  in  land  values  are  primarily  due  to  speculation,  and  this 
plan  would  tend  to  curtail  speculation.  All  things  considered,  it  is 
urged,  now  is  as  good  a  time  as  ever  to  begin  the  gradual  introduction 
of  the  proposed  plan  into  our  tax  system. 

In  answer  to  the  specific  objection  that  the  tax  base  should  not  be 
curtailed  in  the  face  of  increasing  needs  for  revenue,  it  might  be  said 
that  the  exemption  of  buildings  would  not,  in  any  real  sense,  decrease 
the  base.  All  the  tax  that  could  be  levied  on  land  and  buildings  could 
be  collected  from  the  land  alone.  The  land  is  the  base  for  the  building 
tax  now. 

(g).  Finally,  to  the  argument  that  the  plan  might  be  a  good  one 
if  we  were  starting  a  new  city,  or  even  now  in  a  smaller  city,  but  that 
it  should  not  be  introduced  into  a  great  city  like  New  York,  with  its 
enormous  vested  interests  and  its  intimate  relations  with  the  finan- 
cial business  of  the  country,  it  is  said  in  reply  that  because  a  city  has 
grown  up  with  a  wrong  system  is  no  sufficient  reason  why  it  should 
run  on  the  wrong  track  forever.  Moreover,  as  New  York  is  the  great- 
est of  American  cities,  so  the  evil  effects  of  congestion,  unsymmetrical 
development  and  an  unjust  system  of  taxation  are  most  marked.  If 
the  proposed  plan  will  produce  the  eflPects  claimed  for  it,  then  New 
York,  of  all  places,  needs  to  have  it  put  into  effect.  The  fact  that  there 
are  great  vested  interests  here  is  no  reason  against  it,  especially  as  the 
ownership  of  land,  and  even  the  investment  in  buildings,  are  highly 
speculative  business  in  New  York.  The  shifting  of  values  through  the 
working  of  powerful  social  forces  already  takes  place  on  so  large  a  scale 
that  the  unsettling  effect  of  the  proposed  exemption  of  buildings  from 
taxation  would  be  mild  and  innocuous  compared  with  what  is  going 
on  already.  A  change  in  the  shopping  center,  a  diversion  of  traffic  by 
a  new  transit  line,  the  building  of  a  new  bridge  and  many  other  forces 
now  at  work  are  making  tremendous  shifts  in  values.  Of  all  times 
and  of  all  places  this  time  and  this  city  are  the  most  favorable  for  in- 
stituting the  change.  Everything  is  in  a  state  of  flux.  While  we  are 
all  shaken  up  anyhow  is  the  time  to  prepare  to  settle  down  on  right 
lines  if  we  hope  ever  to  do  so.  The  people  of  New  York  themselves  do 
not  half  appreciate  what  a  tremendous  crisis  they  are  going  through. 
Values  in  portions  of  Manhattan  are  depressed  and  it  appears  that 
Manhattan's  resident  population  has  come  to  a  standstill  or  even  com- 
menced to  decline.  Because  of  our  habits  of  thought  and  because  of 
the  preponderant  weight  of  Manhattan  values,  many  people  tend  to 
judge  the  condition  of  the  city,  as  a  whole,  by  what  is  going  on  in  Man- 
hattan. In  fact,  Manhattan  constitutes  only  seven  per  cent  of  the 
area  of  the  city  and  now  contains  only  42  per  cent,  of  the  total  popula- 

57 


I  \'M 


1 1 :  t 


tion,  although  fifteen  years  ago  it  contained  54  per  cent.  The  cry  of 
half  a  century  for  relief  from  the  dreadful  congestion  of  population  on 
Manhattan  Island  is  at  last  being  heard.  In  1904,  prior  to  the  opening 
of  the  Williamsburg  Bridge,  there  were  only  four  transit  tracks  across 
the  East  River  connecting  Manhattan  with  Long  Island.  Within  the 
short  space  of  fifteen  years,  of  which  eleven  are  already  past,  the  number 
of  transit  tracks  across  the  East  River  will  have  increased  to  thirty- 
eight.  During  the  same  period  the  number  of  local  transit  tracks  across 
the  Harlem  River  will  have  increased  from  ten  to  thirty,  and  the 
McAdoo  tubes  with  four  tracks  crossing  the  Hudson  have  been  opened 
during  the  same  time.  It  is  no  wonder  that  Manhattan  land  values 
are  upset  and  Manhattan  land  owners  quaking  in  their  boots.  While 
the  patient  is  in  the  hospital  is  the  very  best  time  to  perform  another 
operation  on  him  that  will  tend  to  relieve  him  of  a  long-standing  ail- 
ment and  help  him  recuperate  more  completely. 

If  the  plan  is  a  good  one,  it  would  seem  that  New  York's  need  for 
it  is  the  greatest,  and  the  present  time  is  the  best.  Here,  better  than 
anywhere  else,  and  now,  better  than  at  any  other  time,  can  the  merit 
of  the  plan  be  demonstrated,  and  the  manner  of  introducing  the  new 
system  is  so  conservative  that  the  "shock"  can  readily  be  absorbed. 

Vancouver,  which  has  fallen  upon  evil  times,  following  the  collapse 

of  the  boom  in  Western  Canada,  and  which  is  now  suffering  a  depression, 

reported  to  be  much  more  severe  than  any  New  York  has  seen  in  recent 

years,  refuses  to  take  a  backward  step  in  the  matter  of  the  exemption 

of  buildings  from  taxation.    Mayor  Taylor,  who  was  returned  to  office 

about  a  year  ago  largely  on  this  issue,  in  a  recent  published  article, 

makes  the  following  statement: 

"The  City  of  Vancouver,  like  many  individuals,  has  had  to  curtail 
its  expenditures  in  every  direction,  but  notwithstanding  this,  when  the 
council  brought  down  the  estimates  for  the  current  year  and  struck  the 
tax  rate,  the  resolution  to  exempt  improvements  carried  for  the  sixth 
time,  without  a  dissenting  vote." 

CONCLUSIONS  AND  RECOMMENDATIONS. 
We  believe  that  the  weight  of  the  evidence  placed  before  the  Com- 
mittee, when  properly  valued  in  the  light  of  practical  experience  and 
sound  economic  theory,  is  distinctly  in  favor  of  the  proposition  to  dif- 
ferentiate between  buildings  and  land  values  in  taxation  by  transferring 
all  or  a  portion  of  the  tax  now  levied  on  buildings  in  New  York  City 
to  land  values. 

We  are  of  the  opinion  that  the  untaxing  of  buildings  properly  ap- 
plied would  result  in  great  benefits  to  the  city  and  its  people. 

It  would  tend  to  discourage  speculation  in  land  as  distinguished 
from  the  actual  development  of  real  estate  for  use. 

It  would  tend  to  bring  land  values  down  to  their  actual  use  value. 

58 


It  would  tend  mildly  to  stimulate  building  operations,  and  particu- 
larly to  cause  the  replacement  of  obsolete  and  inadequate  buildings  with 
more  modern  and  better  ones. 

It  would  tend  to  bring  symmetry  into  the  city's  development. 

It  would  tend  to  a  decrease  in  rents. 

It  would  encourage  the  building  of  small  homes  in  the  suburbs 

It  would  tend  to  increase  the  city's  prosperity  and  thereby  reduce 
unemployment,  mcrease  wages,  and  add  to  the  profits  of  capital  pro- 
ductively invested. 

^       It  would  institute  a  fundamental  change  for  the  better  in  our  tax- 
ing system,  which  in  the  long  run  would  bring  benefits,  small  in  detail 
but  immense  in  the  aggregate,  to  many  millions  of  human  beings 

For  practical  reasons  we  would  not  recommend  the  actual  removal 
of  buildings  from  the  assessment  roll,  and  would  recommend  that  the 
proposed  exemption  be  put  into  effect  gradually. 

We  should  accept  with  equanimity  a  law  requiring  a  progressive 
reduction  of  the  tax  rate  on  buildings,  continuing  until  the  rate  on 
buildings  should  be  one-half  the  rate  on  land.  We  regard  the  estab- 
ishment  of  the  principle  and  its  continuous  exercise  as  more  impor- 
tant than  the  rate  at  which  the  particular  reduction  should  proceed 
In  our  judgment  a  moderate  reduction  of  the  tax  rate  on  buildings  will 
prove  so  satisfactory  that  when  the  public  is  accustomed  to  the  de- 
crease a  more  rapid  reduction  may  be  almost  unanimously  demanded 

FREDERIC  C.  LEUBUSCHER. 
DELOS  F.  WILCOX, 
LAWSON  PURDY, 
FREDERIC  C.  HOWE, 
FREDERIC  B.  SHIPLEY. 

UNTAXING  OF  BUILDINGS. 
Dissenting  Memorandum  By  Mr.  Shipley. 

of  »nfn'''^"\^'M?.  *^^  "'^^''"^^  recommendation  against  the  principle 
P  essedT^h  S"^':  "l^  '""^"^  substantially  with  the  views  ex- 
pressed in    The  Minority  Report  on  the  Untaxing  of  Buildings."    How- 

calculahW  r"^  '^''  f '  ''^'"''''^  "'  ''^''y  ^^'^'^  ^^-'  -"^  ^or  the 
StmS,.     ^"  r."""''  ^''  "^^'^  '^  ^"y  ^^^^"^^  ^^  "^"nicipal  revenue 

whir  Z  [  °  ^^^'^  ^"^  P^^'^^^^  ^^"^^^  ^^  unsettling  price  values 
which  might  otherwise  indirectly  result  from  ill-advised  fears. 

FREDERIC  B.  SHIPLEY. 

UNTAXING  OF  BUILDINGS. 

Dissenting  Memorandum  By  Mr.  Binkerd. 

made  .t  .mposs.ble  for  me  to  meet  with  it,  or  to  participate  in  its 

59 


<rh 


illli! 


public  hearings,  in  the  final  and  most  important  stage  of  its  work.  The 
only  fair  thing  I  can  do,  therefore,  is  to  file  an  individual  statement. 

Without  intending  any  criticism  as  to  the  intention  of  the  majority 
report  to  be  fair,  I  agree  with  slight  reservations  in  the  minority  report 
on  untaxing  buildings. 

It  follows  that  I  believe  in  raising  additional  local  revenue  by  a 
super  tax,  or  an  unearned  increment  tax,  on  land, 

ROBERT  S.  BINKERD. 


UNTAXING  OF  BUILDINGS. 

Dissenting  Memorandum  By  Mr.  Tomlin. 

I  do  not  agree  with  the  majority  in  recommending  against  untaxing 
buildings  and  a  super  tax  on  land.  Practically  all  the  argument  against 
an  increased  tax  on  land  is  based  on  the  claim  that  it  will  injure  the 
business  of  land  speculation,  and  there  is  very  little  doubt  that  this 
is  true.  Injuring  or  benefiting  any  special  business  or  interest  is  some- 
thing with  which  we,  as  a  Committtee,  have  nothing  to  do.  The  only 
question  that  concerns  us,  in  considering  any  proposed  measure,  is: 
Will  it  promote  the  welfare  and  prosperity  of  the  people  of  the  City  at 
large,  immediately  or  ultimately?  When  a  new  system  or  method  or 
machine  is  introduced  into  an  industry  which  causes  hundreds  or  thou- 
sands of  people  to  be  thrown  out  of  employment,  we  do  not  stop  to 
inquire  what  will  become  of  these  people.  We  simply  say :  The  change 
is  in  the  line  of  progress  and  these  people  must  seek  other  employment, 
and  so  if  putting  a  better  system  of  taxation  into  operation  incidentally 
causes  injury  to  any  special  interest  those  who  are  injured  must  sub- 
mit to  the  same  fate  that  causes  injury  to  the  working  people,  by  intro- 
ducing new  and  improved  methods  or  machines.  I  am  of  the  opinion 
that  untaxing  buildings  will  very  materially  improve  the  welfare  of 
the  people  of  the  city,  but  I  am  not  so  much  of  an  enthusiast  as  to 
imagine  that  this  measure  will,  of  itself,  bring  about  a  municipal 
millennium.  '       !   .1 

FRANKLIN  S.  TOMLIN. 


60 


f 


PART   TWO. 


SOURCES  OF  ADDITIONAL  REVENUE 


PRELIMINARY  STATEMENT. 

During  the  Autumn  of  1914,  your  Committee  were  made  ac- 
quainted with  the  fiscal  emergency  which  suddenly  confronted  the  city 
because  of  the  probability  of  the  imposition  of  a  large  direct  State  tax, 
and  of  the  burdens  added  to  the  city  by  the  adoption  of  the  new  plan 
of  financing  public  improvements. 

On  January  18,  191 5,  your  Committee  made  a  preliminary  report, 
in  which  they  tentatively  advanced  the  plan  of  a  presumptive  income 
or  ability  tax.  Several  months  later,  the  State  Joint  Legislative  Com- 
mittee on  Taxation  was  appointed  to  consider  the  entire  problem  of 
public  revenues. 

On  November  15,  191 5,  that  Committee  issued  a  statement  in  which 
there  were  briefly  brought  to  public  attention  three  proposed  taxes, 
viz. :  The  Income  Tax,  the  Classified  Personal  Property  Tax,  and  the 
Ability  or  Presumptive-Income  Tax.  In  view  of  this  statement  of  the 
Joint  Legislative  Committee,  your  Committee  deem  it  wise  to  define 
their  attitude  to  these  three  suggested  projects,  and  to  add  such  other 
considerations  as  seem  to  be  pertinent. 

We  have  been  informed  by  the  municipal  authorities  that  even  if  we 
assume  that  the  cost  of  government  can  be  kept  at  its  present  level,  the 
city  will  have  to  raise,  exclusive  of  the  State  direct  tax,  the  following 
amounts  over  and  above  the  budget  for  this  year: 

1917    $10,137,000 

1918    19,400,000 

1919    34,719,000 

1920    34.554.000 

.  If  to  this  we  add  New  York  City's  share  of  the  probable  State 
direct  tax  we  are  confronted  by  the  staggering  situation  that  within  a 
few  years  New  York  City  will,  if  the  estimates  are  correct,  need  an 
additional  revenue  of  between  $40,000,000  and  $50,000,000.  On  the 
other  hand  we  have  the  unquestioned  fact  that  real  estate  is  in  a  con- 
dition of  depression  which  has  rarely  been  equalled  in  the  history  of 
New  York.  A  proposal  to  meet  these  large  additional  expenditures 
wholly  by  an  increase  in  the  general  property  tax  would  necessitate 

61 


f 

1 

1  ■ ' 

, 


I  ■! 


spread  ruin,  and  wou.d     „  lolf  ^  ""'""'  """''*  *^^"^^  -•'^^- 

It  must  be  remembTd  t'hlt  ,  '  ^'  '^""P'^tely  unenforceable, 

full  valuationTsTomllhint     1?:''^"''^}''^  '^^'^  <>'  °ver  two  per  cent,  on 

/  une  01  tne  tax  committees  or  commissions  of  the  oast  half  r^n 

new  sources  of  revenue  not  only  from  the  point  of  view  o    providfn^ 

The  next  alternative  was  to  impose  a  multiplicity  of  taxe,  on  ,11 
sorts  of  commodities,  businesses,  and  other  subjects  of  tLT^^     v 
Committee  realize  that  some  revenue  could tSt  secured  Tr'om 
Z       Tn  k''  ^^'^  °"  -"tomobiles.  theater  tickets,  mo^nTpicZ 
shows    b.ll-boards,  telephones,  commercial  transactions,  and  Ve  Tke 

f^    thteTea::ns"  M'^'T^'Z'-  ^''  ''''"'^''^'  '^^'^  ^u^e 
tL   t,       ^«^5°ns-     F"-st,  these  mdirect  taxes,  almost  without  exceo- 

7tiZTL.       /  government  has  again  very  recently  begun  to 

TrJllT  •  •  *'""•  """^  '*  '^  ""*''^'y  P^°''-t'le  that  it  wilf5o  so 

iLh  r"!'y  •""^^«'"?  «t««t  in  the  near  future.  In  the  second  place 
each  particular  mterest  sought  to  be  subjected  to  tax  would  raise  the 
cry  that  .t  should  not  be  singled  out  for  special  burde„s,!°d  wou S  thul 
senously  .rnpede  the  elaboration  of  any  comprehensi;e  mersurl  L 
he  th^d  place,  the  revenue  from  all  these  sources  combined  would  t, 
the  opm,on  of  the  Committee,  be  entirely  inadequate  to  meet  the  p;*!- 

68 


ent  emergency  and  some  more  comprehensive  scheme  would,  at  all 
events,  have  to  be  adopted.  It,  therefore,  seems  to  your  Committee 
wiser  to  concentrate  attention  upon  this  more  comprehensive  scheme. 
In  considering  the  situation,  your  Committee  were  impressed  by 
the  fact  that  the  City  of  New  York  is  the  wealthiest  city  in  America,  and 
one  of  the  wealthiest  in  the  world.  The  ability  of  the  inhabitants  of 
the  City  of  New  York  to  defray  the  expenses  of  the  city  is  undoubted. 
The  real  problem  is  to  find  an  equitable  and  expedient  method  of  reaching 
this  ability.  The  most  obvious  solution  of  the  problem  is  through  an  in- 
come tax. 


63 


I 


Hi 


I.    INCOME  TAX. 
Majority   Report. 

When  your  Committee  originally  considered  the  advisability  of  an 
income  tax,  they  were  confronted  by  the  fact  that  as  the  problem  was 
a  purely  local  one  we  could  not  discover  any  administrative  machinery 
which  would  make  a  direct  municipal  income  tax  feasible.  Under  exist- 
ing conditions,  we  thought,  and  still  think,  it  impracticable  to  localize 
income  for  the  purposes  of  a  municipal  income  tax. 

An  entirely  different  complexion  has,  however,  been  given  to  the 
problem  by  the  creation  of  the  Joint  Legislative  Committee  of  the 
State,  and  by  the  possibility  of  instituting  an  income  tax  under  geiv 
eral  state  law. 

Your  Committee  have  always  been  of  the  opinion  that,  in  principle^ 
the  direct  income  tax  is  one  of  the  fairest  of  all  taxes.  They  believe, 
furthermore,  that  a  bill  can  be  drawn  which,  if  passed,  will  make  the 
income  tax  entirely  workable  under  general  state  law,  and  they  agree 
that  such  a  tax,  carefully  devised,  would  go  far  towards  solving  the 
fiscal  problem  of  New  York  City  as  well  as  that  of  New  York  State. 
While  your  Committee  do  not  deem  it  proper,  in  view  of  the  antici- 
pated report  by  the  Joint  Legislative  Committee,  to  present  any  definite 
bill,  and  while  they  reserve  the  right  to  criticize  or  even  to  oppose  any 
special  provisions  of  the  project  which  may  be  submitted  by  the  Joint 
Legislative  Committee,  your  Committee  believe  that  the  following  gen- 
eral principles  ought  to  be  observed  in  an  income  tax  applicable  to  the 
conditions  of  New  York: 

First.  All  incomes  ought  to  be  taxed,  whether  they  accrue  to  resi- 
dents of  New  York  or  whether,  if  they  are  within  the  State  of  New 
York,  they  accrue  to  non-residents.  The  adoption  of  this  principle, 
which,  in  the  opinion  of  your  Committee  is  legally  entirely  possible, 
would  completely  differentiate  the  income  tax  from  the  personal  tax. 

Second.  Only  so  much  of  the  income  tax  should  be  taxable  within 
New  York  as  fairly  belongs  to  New  York  in  the  face  of  interstate  rela- 
tions. A  just  system  of  allocating  income  both  within  and  without  the 
State,  and  within  and  without  the  localities  of  the  State,  ought  to  be 
devised. 

Third.  The  exemption  from  income  tax  ought  to  be  reduced  be- 
low the  level  of  that  existing  in  the  present  Federal  tax.  The  exemption, 
however,  ought  not  to  be  so  low  as  to  trench  on  the  income  of  the  wage 
earner  who  is  compelled  to  spend  virtually  his  entire  income. 

64 


Fourth.  The  rate  of  income  tax  ought  to  be  proportional  and  not 
graduated,  as  the  larger  incomes  are  already  reached  at  a  higher  rate  by 
the  Federal  tax.  A  very  low  rate,  as  will  be  seen  below,  will  be  ade- 
quate to  yield  a  substantial  revenue. 

Fifth.  The  administration  should,  as  far  as  possible,  be  in  the 
hands  of  central  authorities  so  as  to  ensure  both  expertness  and  im- 
partiality. 

Sixth.  The  returns  ought  to  be  made,  as  far  as  possible,  dupli- 
cates of  the  returns  for  the  Federal  income  tax,  with  such  minor  addi- 
tions as  may  seem  necessary. 

Seventh.  Use  should  be  made,  as  far  as  possible,  of  the  principle 
of  information  at  source,  in  preference  to  the  system  of  collection  at 
source. 

Eighth.  Complete  secrecy  should  be  required  of  all  the  officials 
and  employees  with  regard  to  any  details  disclosed  in  any  income 
returns. 

Ninth.  The  personal  property  tax  should  be  abolished,  or  if  that 
be  found  to  be  impracticable,  the  amount  paid  as  a  personal  property 
tax  should  be  deducted  from  the  amount  payable  as  income  tax. 

With  the  observance  of  these  principles,  your  Committee  believe 
that  an  income  tax  would  be  desirable. 

Two  possible  methods  of  safeguarding  the  fiscal  interests  of  the 
City  of  New  York  might  be  adopted.  In  the  first  place  a  2%  income 
tax  might  be  levied  by  the  State,  of  which  50%  or  75%  might  go  to 
the  localities.  We  believe  that  an  income  tax  on  the  lines  sketched 
above,  even  if  all  public-service  corporations  were  exempted  from  in- 
come tax  and  continued  to  be  taxed  as  at  present,  would  yield  at  the 
rate  of  1%  from  $20,000,000  to  $25,000,000.  Allowing  for  the  deduc- 
tion of  the  personal  property  tax  a  2%  income  tax  would  yield  net  not 
far  from  $40,000,000.  If  50%  went  to  the  localities,  the  share  of  the 
City  of  New  York  would  be  somewhere  around  $15,000,000,  and  if  we 
were  to  add  to  this  the  remission  from  the  direct  State  tax  there  would 
accrue  to  the  City  of  New  York  about  $30,000,000.  If,  instead  of  giving 
to  the  localities  50%,  the  share  of  the  localities  were  to  be  increased  to 
75%,  the  advantage  to  New  York  City  would  naturally  be  greater. 

On  the  other  hand,  if,  for  some  reason,  it  seemed  unwise  or  im- 
practicable for  the  State  to  levy  a  direct  income  tax,  your  Committee 
would  recommend  that  by  State  law  there  should  be  given  the  privilege 
to  the  City  of  New  York  to  substitute  for  the  direct  State  tax  on  prop- 
erty, an  income  tax  to  be  levied  according  to  general  rules  laid  down 
m  the  State  law,  and  with  such  additions  to  the  rate  of  income  tax  for 
municipal  purposes  as  might  be  recommended  by  the  municipal  authori- 

65 


^tli 


!!! 


ill! 


P 


\> 


!i. 


t^s.    To  this  extent,  we  are  in  favor  of  the  plan  of  local  option  even 
in  taxation,  for  it  would  be  an  option  carefully  guarded. 

ALFRED  E.  MARLING, 
EDWIN  R.  A.  SELIGMAN, 
FRANK  HARVEY  FIELD, 
JOSEPH  N.  FRANCOLINI, 
JOHN  J.  HALLERAN, 
HAMILTON  HOLT, 
JEREMIAH  W.  JENKS, 
WALTER  LINDNER, 
CYRUS  C.  MILLER, 
lOUIS  HEATON  PINK, 
DAVID  RUMSEY, 
OSCAR  R.  SEITZ, 
CHARLES  T.  WHITE. 


INCOME  TAX. 

Concurring  Memorandum  By  Mr.  Simon. 

If  the  State  Income  Tax  can  be  made  absolutely  workable,  I  am 
st^ngly  m  favor  of  it.  If  not,  I  would  prefer,  as  my  second  choice,  the 
Ability  or  Presumptive  Income  Tax. 

ROBERT  E.  SIMON. 

INCOME  TAX. 

Concurring  Memorandum  By  Messrs.  Purdy  and  Kline. 

We  concur  in  the  conclusion  that  under  existing  conditions  an  in- 
come  tax  is  preferable  to  the  personal  property  tax.  If  an  income  tax 
should  be  imposed,  the  tax,  in  respect  of  income  from  shares  and  bonds 
of  corporations  doing  business  in  this  State,  should  be  collected  at 
source  by  requiring  such  corporations  to  pay  in  proportion  to  dividend 
and  interest  disbursements.  Natural  persons  would  then  deduct  the 
tax  so  paid  on  their  behalf.  Such  corporations  should  be  exempted 
from  the  provisions  of  Section  182,  and  would  not  be  required  to  make 
any  statement  as  to  income  other  than  the  statement  as  to  disburse- 
ment  of  dividends  and  interest  and  such  statement  as  might  be  re- 
quired to  apportion  the  tax  in  case  part  of  the  property  of  the  corpora- 
tion  IS  without  the  State. 

The  State  should  collect  the  tax  and  distribute  all  of  it  to  the  cities 
and  towns  in  proportion  to  the  equalized  assessed  value  of  real  estate. 

LAWSON  PURDY, 
ARDOLPH  L.  KLINE. 

86 


I 


INCOME  TAX. 

Concurring  Memorandum  By  Mr.  Binkerd. 

I  should  be  glad  to  see  an  income  tax  adopted  for  State  purposes, 
so  that  the  property  tax  would  be  used  exclusively  to  support  local 
government.    I  am  opposed  to  a  local  income  tax  as  a  part  of  the  city's 

permanent  revenue  system. 

ROBERT  S.  BINKERD. 


INCOME  TAX. 
Concurring  Memorandum  By  Messrs.  Mullan  and  Woodward. 

In  concurring  with  the  majority  of  the  Committee  in  its  recom- 
mendation of  an  income  tax,  we  restrict  ourselves  to  an  endorsement 
of  the  bare  principle  of  that  plan,  as,  in  the  first  place,  we  are  unable 
to  subscribe  to  many  of  the  specific  recommendations  contained  in  the 
majority  report,  and,  in  the  second  place,  we  do  not  believe  the  plan 
can  be  successfully  operated  at  this  time  by  a  State,  certainly  by  a 
State  like  New  York,  in  view  of  existing  legal  and  economic  conditions. 

As  to  the  first  ground  for  our  dissent,  we  will  cite  only  one  ex- 
ample, the  suggested  proportional  rate.  Just  why  it  should  be  a  reason 
against  a  progressive  tax  that  the  Federal  income  measure  contains 
that  usual  feature  of  the  direct  income  plan,  we  fail  to  see.  Such  force 
as  there  may  be  in  that  species  of  argument  could  be  equally  employed 
against  the  adoption  of  any  State  income  tax. 

As  to  the  second  ground,  we  will  mention  merely  a  single  ad- 
ministrative difficulty,  that  of  so  apportioning  sources  of  income  as  to 
refer  to  this  State  only  such  income  as  is  derivable  from  activities  and 
property  located  here. 

We  believe  that  a  direct  income  tax  is,  under  the  right  conditions, 
the  most  just  and  scientific  of  all  plans  yet  devised  for  the  raising  of  the 
revenue  needed  to  maintain  social  organization.  It  is  with  reluctance, 
therefore,  that  we  feel  compelled  to  express  the  opinion  that,  although 
we  may  in  time  come  to  the  adoption  of  the  income  tax  for  State  pur- 
poses, that  device  offers  to  us  no  prospect  of  success  in  the  performance 
of  the  task  that  has  been  set  us,  that  of  providing  the  revenue  needed 
to  meet  the  existing  financial  crisis  in  this  city.  We  believe  that  a 
long  period  of  experimentation,  with  possibly  an  amendment  of  the 
Federal  Constitution,  will  be  required  in  order  to  make  of  a  State  in- 
come tax  in  this  State  a  workable  and  money-producing  scheme ;  and,  in 
our  judgment,  we  must  turn  to  some  other  plan  that  promises  better 
and  more  immediate  results. 

GEO.  V.  MULLAN, 
COLLIN   H.  WOODWARD. 

67 


I  i 


1(1 


in 


INCOME  TAX. 
Dissenting  Memorandum  By  Mr.  Leubusclier. 

I  dissent  from  the  majority  report  recommending: 

1.  The  Income  Tax. 

2.  The  Presumptive  Income  or  Ability  Tax  (including  the  Habi- 
tation, the  Occupation  and  the  Salaries  Taxes). 

3.  The  Land  Increment  Tax. 

All  of  these  taxes  and  the  general  system  of  local  and  State  taxa- 
tion must  be  considered  in  connection  with  the  Federal  system  of  rais- 
mg  revenue.  Nearly  all  of  the  $700,000,000  expended  last  year  by  the 
Federal  Government  (exclusive  of  the  Post  Oflfice  deficit)  was  raised  by 
tariff  and  internal  revenue  taxes.  The  greater  part  of  these  were  paid 
by  the  poor  and  those  in  moderate  circumstances.  Prof.  Seligman  in 
his  book  on  "The  Income  Tax,"  states: 

"In  a  country  of  the  prodigious  wealth  of  the  United  States  it  is 

ernmenf Sh°K  '°  'F  *^"l  '^'  *"*'^^  ^^P^"«^«  °f  ^he  National  Gov! 
IIJ^M  K  ''^**"'y  •?""*  ^y  ^  "y^*^"  °f  '"'ernal  excises  which  would 
even  then  be  moderate  in  both  rate  and  extent.  Instead  of  reckonW 
Zl  '"t^'-"^  J:«^t""«  by  the  few  hundreds  of  millions,  we  could  3 
out  great  difTiculty,  reckon  it  almost  by  the  thousands  of  millions'^ 

The  majority  plan  to  raise  such  vast  sums  from  the  workers.  Every 
dollar  which  they  propose  to  get  through  the  income  and  ability  taxes 
for  local  purposes,  should  be  secured  by  the  Federal  Government  to 
meet  increases  in   Federal  expenditures  and  to  reduce  the  tariff  and 
internal  revenue  taxes  on  the  hundreds  of  thousands  of  families  in  the 
United  States  whose  total  income  is  from  $100  to  $300  less  than  that 
required  to  maintain  a  reasonable  standard  of  efficiency.    In  New  York 
City  this  standard  has  been  estimated  to  be  nearly  one  thousand  dollars 
The  avowed  purpose  of  the  income  and  the  presumptive  income 
oraTLe'rnmet      T^  who  do  not  pay  their  fair  share  oi  the  cosH 
ocal  government      The  majority  have,  however,  entirely  overlooked 
the  absentee  landlords.     Probably  about  a  tenth  of  the  value  of  land 
m  the  city  ,s  owned  by  people  who  do  not  live  here,  or  live  here  for  only 
a  few  weeks  in  the  year     The  most  conspicuous  example  is  William 
Waldorf  Astor,  who  is  the  owner  of  the  record  of  land  in  the  city  Z 
sessed  for  $33.522,ioo.    The  net  ground  rent,  calculated  at  only  4%    s 
$1,330,880.    Mr.  Astor  pays  the  British  Government  34%  on  hi  ijrom. 
m  excess  of  $500,000.    Even  supposing  that  he  had  no  other  income^! 

S:^  an'?'  ""hT^T*  r  '"^^"^  ^^'^  ^"  $830,880,  amou„rg   o 
$282,500.  all  derived  from  his  land  holdings  in  New  York  City     As  h^ 

has  a  large  income  from  house  rents,  bonds,  mortgages  etc    it'i,  nt.. 
that  he  pays  the  British  Government  an  income^tafon  a^'  L^'^t 

n:??  mliiS;  n^l '-''  '''•''^■'^''  -^'  -  p-^^'"x  exceed-.;; 

68 


THE   INCOME   TAX. 
I  oppose  an  income  tax  for  local  and  State  purposes  for  the  fol- 
lowing chief  reasons: 

1.  The  amount  of  revenue  that  can  be  secured  by  an  income  tax 
is  limited,  and  every  dollar  obtained  in  this  way  is  needed  by  the  Fed- 
eral Government.  If  revenue  is  derived  through  this  method  by  cities 
and  states,  the  Federal  Government  must  tax  the  industry  and  ultimate- 
ly the  workers  of  the  country  more  heavily. 

The  Federal  Budget  will  be  at  least  $850,000,000  next  year,  ex- 
clusive of  the  postal  deficit. 

Last  year  only  $41,046,000  was  secured  from  the  individual  Federal 
income  tax.  Should  the  Federal  Government  take  a  third  of  the  total 
income  of  those  who  have  an  income  of  $1,000,000  a  year,  counting  the 
average  income  of  those  individuals  of  $3,000,000,  and  tax  the  total  in- 
comes of  those  now  receiving  incomes  of  $500,000  to  $1,000,000,  25%, 
and  all  large  incomes  at  the  war  rates  of  European  countries,  taking  3 
per  cent,  of  the  total  incomes  of  those  receiving  $3,333  to  $5,000  and  i 
per  cent,  of  the  total  incomes  of  those  receiving  $2,500  to  $3,333»  ^^^s 
would  yield  only  about  $350,000,000,  which  is  approximately  one-third 
of  the  revenue  the  Federal  Government  will  doubtless  have  to  secure 
within  a  few  years. 

2.  The  majority  do  not  recommend  any  particular  rate  but  ap- 
prove the  proposal  of  the  Joint  Legislative  Committee,  which  is  to 
levy  a  State  and  local  income  tax  of  i  per  cent,  on  small  incomes  and 
only  2  per  cent,  on  large  incomes.  This  violates  every  principle  of  jus- 
tice. The  I  per  cent,  income  tax  will  be  levied  chiefly  upon  small  sal- 
aried persons  and  others  dependent  upon  their  daily  toil,  or  exertions, 
for  their  living. 

The  majority  of  the  102  persons  in  this  State  who  have  an  income 
of  $500,000  or  over,  derive  most  of  it  from  secure  investments.  It  would 
be  fairer  to  tax  these  102  persons  10  per  cent,  of  their  income  for  State 
and  local  purposes  than  to  tax  the  professional  men,  small  shopkeepers, 
clerks,  etc.,  at  one  per  cent,  on  their  incomes  under  $10,000  for  these 
purposes,  because  they  are  now  paying  a  vastly  larger  proportion  of 
their  earnings,  for  the  cost  of  local.  State  and  Federal  Governments, 
than  those  receiving  $50,000  and  over,  and  it  would  chiefly  be  a  tax 
upon  unearned,  instead  of  earned,  incomes. 

The  majority  say  of  the  local  income  tax :  "The  rate  of  income  tax 
ought  to  be  proportional  and  not  graduated,  as  the  larger  incomes  are 
already  reached  at  a  higher  rate  by  the  Federal  tax."  The  maximum 
Federal  rate  is  only  6%  on  the  excess  of  $500,000,  while  our  present 
tax  system  costs  many  workers  nearly  a  fifth  of  their  earnings.  No 
distinction  is  made  between  the  man  who  earns  his  salary  of  $3,000 
and  the  man  who  draws  $3,000  a  year  from  city  bonds  and  lives  in 
leisure.    Both  have  the  same  "income."    Assume  that  each  man  has  a 

69 


tii 


wife  and  three  children ;  the  first  one  must  save  for  the  future,  but  the 
other  inherited  leisure  and  income.  It  is  obviously  most  unjust  to  tax 
both  at  the  same  rate. 

3.  The  majority  state  in  effect  that  they  wish  to  prevent  the  work- 
ers of  the  city  from  saving  anything,  and  to  tax  those  who  earn  as  soon 
as  they  begin  to  save;  but  they  have  the  most  tender  solicitude  for 
those  who  have  amassed  fortunes.  They  say:  "The  exemption  from 
the  mcome  tax  ought  to  be  reduced  below  the  level  of  that  existing 
in  the  present  Federal  tax.  The  exemption,  however,  ought  not  to 
be  so  low  as  to  trench  on  the  income  of  the  wage  earner  who  is  com- 
pelled to  spend  virtually  his  entire  income." 

The  assumption  of  the  majority  that  government  should  take  more 
taxes  as  soon  as  a  wage  earner  begins  to  save  a  little  in  order  that  he 
and  his  family  may  not  be  dependents,  is  a  new  concept  of  the  science 
of  government.  It  is  similar  to  the  suggestion  of  a  professor  of  econo- 
mics who  has  urged  a  tax  of  $1,000  for  every  child.  Of  course,  he  op- 
posed the  untaxing  of  buildings. 

4.     Whether  designedly  or  not,  the  plan  of  the  Joint  Legislative 
Committee,  which  is  endorsed  by  the  majority  of  our  Committee,  may, 
if  adopted,  play  into  the  hands  of  those  who  believe  in  a  higher  tariff! 
State  Senator  Mills,  the  Chairman  of  the  Joint  Legislative  Committee, 
stated  that  cities  and  states  should  adopt  an  income  tax  before  the  Fed- 
eral  Government  dries   this  up  as  a  source   of  revenue.     New   York 
State  now  pays  42%  of  the  Federal  income  tax.    If  a  State  income  tax 
be  levied,  it  will  be  urged  with  great  insistence  that  it  would  be  con- 
fiscation, so  far  as  the  people  of  New  York  State  are  concerned,  to  in- 
crease  the  rates  of  the   Federal  income  tax;  and  that,  therefore,  the 
greatly   increased   revenue   required   for   national   "preparedness"   and 
other  purposes  must  be  raised  by  increasing  the  tarifif  charges  on  im- 
ported commodities. 

5.    We  agree  with  Prof.  Seligman's  opinion,  as  stated  in  his  work 
on  "The  Income  Tax"  (1914  Ed.),  as  follows: 

"If  any  one  lesson  is  to  be  learned  from  Swiss  experience,  it  is 
that  a  system  of  State  income  taxes,  resting,  as  do  the  general  property 
taxes,  upon  methods  of  local  assessment,  even  when  modified  by  a 
central  state  control,  is  bound  to  fail.  It  is  a  conclusive  proof  of  the  fact 
that  the  way  out  of  American  diflPiculties  is  not  to  be  sought  in  the 
direction  of  any  kind  of  local  or  state  income  tax.  (p.  363)  ♦  *  So 
that  even  at  the  very  best  a  state  income  tax  would  not  be  apt  to  suc- 
ceed unless  It  was  controlled  and  regulated  by  the  Federal  Government, 
either  in  the  formulation  of  the  principles  to  be  adopted  or  in  the 
choice  of  the  administrative  methods  to  be  employed ;  for,  in  no  other 
way  can  the  incomes  derived  from  interstate  business  be  reached  "  (d 
427.)  •     '^*'* 

It  is  claimed  that  the  above  mentioned  desiderata  for  a  successful 
state  income  tax  are  incorporated  in  the  majority  report—first,  by  re- 
quiring the  tax  to  be  a  state  and  not  a  local  one,  and  the  administration 

70 


to  be  "as  far  as  possible  in  the  hands  of  the  central  authorities  so  as  to 
ensure  both  expertness  and  impartiality ;"  and  secondly,  by  the  require- 
ment that  "the  returns  ought  to  be  made  as  far  as  possible,  duplicates  of 
the  returns  for  the  Federal  income  tax,  with  such  minor  additions  as 
may  seem  necessary."  It  seems  to  me,  however,  that  neither  of  these 
meet  the  above  criticisms  that  "the  way  out  of  American  difficulties  is 
not  to  be  sought  in  the  direction  of  any  kind  of  a  local  or  state  income 
tax,"  and  that  "a  state  income  tax  would  not  be  apt  to  succeed  unless 
it  was  controlled  and  regulated  by  the  Federal  Government."  Merely 
copying  the  forms  used  by  the  Federal  Government  and  the  returns 
made  to  that  government  by  the  taxpayers  surely  is  not  tantamount  to 
a  control  and  regulation  by  the  Federal  Government,  even  were  such 
control  and  regulation  constitutional  or  desirable. 

FREDERIC  C.  LEUBUSCHER. 


INCOME  TAX. 

Dissenting  Memorandum  By  Messrs.  Wilcox  and  Howe. 

We  dissent  from  the  majority  recommendation  in  favor  of  an  in- 
come tax  to  be  levied  by  the  State  for  the  benefit,  in  part,  of  the  City 
of  New  York,  for  the  following  reasons : 

1.  For  administrative  reasons  and  on  account  of  equity,  the  in- 
come tax  is  especially  appropriate  to  the  needs  of  the  Federal  Gov- 
ernment and  should  be  developed  much  more  extensively  for  Federal 
purposes.  We  deem  it  inexpedient,  at  least  for  the  present,  that  the 
State  of  New  York  should  attempt  to  share  the  benefits  of  this  tax. 

2.  The  proposed  plan  would  tend  to  tie  up  the  city  finances  too 
closely  with  the  State  finances,  and  make  the  city  too  dependent  upon 
changing  State  policies  for  the  revenues  needed  for  municipal  pur- 
poses. The  practice  of  turning  over  to  the  city  a  fixed  share  of  certain 
taxes  levied  and  collected  by  the  State  may  not  be  objectionable  in  cases 
like  the  mortgage  tax  and  the  excise  tax,  where  the  rate  of  the  tax  is 
the  same  from  year  to  year,  but  in  the  case  of  a  State  income  tax  the 
rate  would  very  likely  fluctuate  with  the  needs  of  the  State,  with  the 
result  that  the  amount  to  be  derived  by  the  city  from  this  source  would 
be  determined  every  year  by  the  Legislature,  not  by  the  local  authori- 
ties. The  municipal  budget,  at  least,  so  far  as  revenues  for  local  pur- 
poses are  concerned,  ought  not  to  be  dependent  from  year  to  year  upon 
the  action  of  the  Legislature. 

3.  The  particular  plan  suggested  provides  for  a  flat  rate  instead 
of  a  graduated  rate  on  the  plea  that  the  larger  incomes  are  already 
reached  by  the  Federal  tax,  which  is  graduated.  It  is  hard  to  see  why 
the  same  rule  as  to  graduation  should  not  apply  in  both  cases.  If  it  is 
just  to  require  the  wealthy  to  pay  according  to  their  ability  for  Fed- 

n 


!l  "li 


€ 


iiili 


i|  ;»•:!, 


cral  purposes    that  is  all  the  more  reason  why  they  should  also  pay 
according  to  their  ability  for  local  purposes.  ^^ 

th,ttn  ^^  i°  "°/  ^^^'^""^  ^^""^  ^^^  exemption  should  be  lower  than 
that  now  or  hereafter  provided  in  the  Federal  income  tax.    Otherwise 

tureof'th  Tr\'""  r"'^  "•"  *^"'«"^**  '°  °ff^«t  the  graduation  fea- 

ZZl     u  *^  ^^  ""P°''"^  ^°'  ^"^'^  ^"*^  '°"1  P"^P°s«s  a  special 

tax  on  small  incomes. 

.  DELOS  F.  WILCOX, 

FREDERIC  C.  HOWE. 

INCOME  TAX. 
Dissenting  Memorandum  By  Mr.  Tomlin. 

State'  TtheTr'  V"  T^  "'  '"  '"^"""^  *^^  "^^  "*her  the  city  or 
Mate  at  the  present  time,  for  the  reason  that  in  all  probability  the  na 

T?  ef        !  ^^'^  ^"'^  "°*  ^y  *^^'"?  the  industries  of  the  country 

FRANKLIN  S.  TOMLIN. 

INCOME  TAX. 
Dissenting  Memorandum  By  Mr.  Shipley. 

I  dissent  from  the  majority  recommendation  of  "A  State  income 
tax  as  a  partial  means  of  securing  the  additional  revenue  reju"ed"n 
the  immediate  future."  While  agreeing  to  its  superiority  to  tSpresei? 
personal  property  tax.  I  believe  it  to  be  impracticable  as  an  emergency 
measure  because  of  administrative  and  legal  difficulties.  "*"««"<=/ 

FREDERIC  B.  SHIPLEY. 


12 


A'.^ 

yj 


I  .. 


2.   CLASSIFIED  PERSONAL  PROPERTY  TAX. 

Majority  Report. 

The  second  project  mentioned  by  the  Joint  Legislative  Committee 
is  the  classified  personal  property  tax,  or  the  low  rate  tax  on  intangible 
personality,  to  be  followed  later  by  a  low  rate  tax  on  tangible  per- 
sonality. Your  Committee  see  no  reason  to  depart  from  the  conclusions 
at  which  they  arrived  several  months  ago,  and  which  were  embodied 
in  a  special  report  made  to  the  Mayor.  Without  repeating  all  the  con- 
siderations which  have  been  previously  urged,  your  Committtee  con- 
tent themselves  by  summing  up  the  objections  to  a  low  rate  tax  on 
personalty,  as  follows: 

1.  It  will  require  for  its  successful  operation  a  listing  system,  which 
has  always  been  repugnant  to  the  citizens  of  New  York.  The  listing 
system  as  applied  in  other  states  to  the  property  tax,  has  always  re- 
sulted ultimately,  with  the  publicity  that  has  by  law  everywhere  attended 
it,  in  an  increase  of  perjury  rather  than  of  revenue. 

The  schedules  required  to  be  filled  out  for  the  existing  Federal  in- 
come tax  cannot  be  considered  as  a  counter  argument.  Secret  returns 
of  income  are  in  their  practical  operation  very  different  from  the  public 
listing  of  personal  property,  including  assets  of  all  kinds  and  thus  neces- 
sarily disclosing  business  secrets. 

2.  The  low  rate  on  personal  property  would  only  slightly  diminish 
the  temptation  to  evasion.  A  rate  of  four  or  five  mills  represents  a  io% 
income  tax  on  4%  or  5%  bonds,  and  an  additional  income  tax  of  10% 
is  not  likely  to  remove  temptations  to  evasion,  especially  in  a  state  like 
New  York  where,  under  the  law,  residence  for  the  purpose  of  taxation 
can  be  so  easily  changed. 

3.  Even  a  low  rate  of  taxation  on  personal  property  would  jeopar- 
dize the  interests  of  New  York  City.  If  levied  upon  securities  it  will  be 
an  intolerable  burden  upon  all  of  these  interests  that  deal  in  securities 
and  whose  profits  are  in  very  slight  relation  to  the  amount  of  securities 
they  may  hold  for  sale. 

In  the  case  of  merchandise,  a  l$w-rate  tax  will  be  a  tax  on  assets 
and  on  stock  in  trade  which  will  bear  with  peculiar  hardship  upon  mer- 
chants, as  in  the  large  wholesale  centers  stock  in  trade  has  no  net  direct  rela- 
tion to  profits. 

4.  A  low-rate  tax  on  personalty  is  confronted  by  the  problem  of 
debts.  If  no  allowance  is  made  for  indebtedness,  the  tax  is  clearly 
unjust.  If  allowance  is  made  for  indebtedness,  inducement  is  given  to 
the  creation  of  fictitious  debts,  which  will  again  result  in  inequality. 

78 


in. 


5.  No  system  of  taxation,  whether  low  rate  or  high  rate,  can  be 
profitably  levied  upon  property  as  such  with  the  exception  of  a  local 
tax  on  real  estate.  The  whole  tendency  of  modern  times  is  to  estimate 
tax-paymg  ability  in  general  in  terms  of  profit  or  income,  not  in  terms 
of  property. 

6.  A  low-rate  tax  will  entirely  fail  to  reach  those  who  are  in  pos- 
session of  large  incomes  from  salaries  or  professional  exertions. 

7.  A  low-rate  tax  will  not  begin  to  yield  the  revenue  that  is  re- 
quired. In  the  few  states  where  the  low-rate  tax  has  been  employed, 
the  mcrease  in  revenue  has  been  only  moderate  and  far  from  what  would 
be  needed  in  New  York.  In  some  of  these  states,  like  Iowa,  there  has 
even  been  an  actual  and  considerable  diminution  of  the  revenue. 

We  believe,  therefore,  that  in  the  existing  situation  of  New  York, 
a  classified  personal  property  tax  would  be  a  step  backward  and  not 
a  step  forward.  It  would  scarcely,  if  at  all,  help  us  in  the  fiscal  emer- 
gency and  it  is  based  upon  an  erroneous  principle  of  public  finance. 

ALFRED  E.  MARLING, 
EDWIN  R.  A.  SELIGMAN, 
FREDERIC  C.  HOWE, 
FRANK  HARVEY  FIELD, 
JOSEPH  N.  FRANCOLINI, 
HAMILTON  HOLT, 
JEREMIAH  W.  JENKS, 
ARDOLPH  L.  KLINE, 
FREDERIC  C.  LEUBUSCHER, 
WALTER  LINDNER, 
CYRUS  C.  MILLER, 
LOUIS  HEATON  PINK, 
ROBERT  E.  SIMON, 
LAWSON  PURDY, 
DAVID  RUMSEY, 
OSCAR  R.  SEITZ, 
CHARLES  T.  WHITE, 
DELOS  F.  WILCOX. 


CLASSIFIED  PERSONAL  PROPERTY  TAX. 

Dissenting  Memorandum  By  Messrs.  Mullan,  Halleran  and  Woodward. 

We  dissent.    While  we  do  not  believe  that  the  classified  low-rate 
personalty  tax  offers  an  ideal  solution,  we  do  believe  that  it  oflFers  the 
only  real  and  practical  solution  of  the  immediate  and  pressing  prob- 
lem of  securing  revenue  additional  to  that  derived  from  real  estate 
Other  plans  may  accomplish  the  same  purely  fiscal  result,  but  none 
to  our  mmd,  will  produce  a  like  result  in  that  respect  with  a  like  mini^ 

74 


mum  of  the  dissatisfaction  and  disturbance  that  must  inevitably  accom- 
pany any  radical  change  in,  or  readjustment  of,  a  taxation  system. 

Eventually  we  must  come,  we  think,  to  what  many  of  those  who 
have  given  serious  thought  to  the  subject  conceive  to  be  the  most  just 
and  equitable  system  of  taxation,  a  tax  based  directly  upon  income.  But 
whether  the  people  of  the  State  are  ready  to  adopt  a  State  income  tax, 
and  whether,  if  they  are  ready  for  it,  that  system  can  be  so  planned  and 
operated  under  existing  conditions  as  to  reach  any  substantial  part  of 
the  vast  wealth  that  finds  lodgment  and  opportunity  here,  are  questions 
that  remain  to  be  answered.  The  economic,  legal  and  administrative 
difficulties  that  lie  in  the  way  of  a  State  income  tax  may  not  be  insu- 
perable, but  they  are  undeniably  great,  and  it  must  be  conceded  that  the 
adoption  of  such  a  system  at  this  time  would  be  at  best  a  step  in  the 
dark,  as  the  much-referred-to  example  of  Wisconsin  oflFers  but  little 
in  the  way  of  encouragement,  and  sheds  practically  no  light  upon  the 
probable  result  of  an  income  tax  in  this  State,  in  view  of  the  very  dif- 
ferent and  infinitely  more  complex  business  and  social  conditions  that 

obtain  here. 

At  the  present  time  it  seems  to  us  that  as  Hobson*s  choice,  if  for 
no  other  reason,  recourse  must  be  had  to  the  classified  low-rate  plan. 
And  it  would  be  idle  to  deny  to  that  plan  the  many  and  great  advantages 

it  possesses. 

One  of  the  most  important  of  these  advantages  is  that  there  is 
nothing  new  about  the  taxation  of  personalty.  The  only  educational 
effort  needed  would  be  to  show  the  taxpayer  that,  instead  of  being  taxed, 
or  of  being  in  danger  of  being  taxed,  at  a  confiscatory  general  property 
tax  rate,  he  would  be  required  to  pay  at  a  fixed  rate  of  only  two  or  three 
mills,  and  to  many  this  information,  however  unpopular  taxation  must 
from  its  very  nature  be,  would  go  in  the  category  of  good  news.  The 
wisdom  of  the  inheritance  tax  lies  in  the  fact  that  it  causes  a  mere 
lessening  of  the  sum  received,  the  loss  of  the  amount  of  the  reduction 
being  to  a  large  extent  lost  sight  of  by  the  beneficiary  because  of  the 
simultaneous  receipt  by  him  of  a  sum  many  times  greater.  The  like- 
ness to  the  mental  attitude  of  a  man  facing  a  greatly  reduced  per- 
sonalty tax  burden  is,  of  course,  not  exact,  but  the  underlying  psychology 
is  not  essentially  different. 

Nor  would  the  principle  of  taxing  personalty  at  a  fixed  low  rate 
be  a  new  departure  in  this  State.  There  are  several  kinds  of  personal 
property  that  we  have  for  years  taxed  in  this  way,  and  the  opponents 
of  the  plan  in  question  have  shown  no  particular  anxiety  to  bring  about 
a  repeal  of  the  statutes  fixing  certain  and  low  rates  for  those  special 
classes.  We  refer  to  bank  shares,  the  shares  of  trust  companies,  mort- 
gages, and  secured  debts;  and  other  examples  of  the  extension  of  the 
principle  might  be  named.  Indeed,  some  of  those  who  are  strongest 
in  their  opposition  to  all  plans  to  change  the  general  personalty  tax 

75 


Mil' 
i 


f 


I  ■ 

i|  ■  : 


;!! 


iiW'iiiii 


h 


m  ;i 


laws  for  the  better  were  active  in  the  efforts  to  secure  the  passage  of 
the  measures  we  have  instanced. 

Not  the  least  of  the  merits  of  the  fixed  low-rate  plan  is  that  under 
it  we  would  commence  operations  with  a  body  of  decision  law  ready 
to  hand  for  immediate  application.  The  change  of  the  rate  would  leave 
undisturbed  the  now  thoroughly  settled  and  well-understood  body  of 
law  on  the  subject  that  it  has  taken  many  years  of  litigation  to  create. 
On  the  other  hand,  our  entry  into  any  new  field  of  taxation  must  of 
necessity  involve  us  in  the  tangles  and  mazes  of  a  new  and  bewildering 
mass  of  decision  that  will  expand  and  change  and  harass  the  taxpayers 
during  all  the  many  years  required  to  bring  about  a  settlement  of  the 
many  mooted  problems  that  may  confidently  be  anticipated.  Even 
under  the  comparatively  simple  conditions  that  prevail  in  Wisconsin, 
the  administration  of  its  income  tax  has  been  hampered  by  perplexities 
and  doubts  on  all  sides,  and  although  that  system  has  been  in  opera- 
tion there  for  nearly  five  years,  the  people  of  Wisconsin  have  not  yet 
begun  to  see  legal  daylight. 

It  would  appear,  though,  from  the  majority  report  opposing  the 
fixed  low-rate  plan,  that  there  is  either  something  inherently  wrong 
about  the  taxation  of  personal  property,  or  that  there  is  no  way  in 
which  personal  property  can  be  taxed.  We  will  waste  no  time  on  any 
supposed  sacrosanct  character  of  personalty  but  will  come  at  once  to 
the  question  of  its  availability  for  providing  tax  revenue. 

The  majority  report  is  a  direct  descendant  of  the  old  taxation  pa- 
pers written  in  the  days  when  government  was  more  simple  and  land 
could  furnish  all  the  needed  revenue.  The  same  familiar  arguments  of 
by-gone  days  are  marshaled  against  the  classified  low-rate  plan  as  were 
so  effectively  employed  against  the  taxation  of  personalty  at  the  gen- 
eral property  tax  rate.  The  draftsman  of  the  report  adheres  to  the 
time-worn  custom  of  those  opposed  to  the  taxation  of  personalty,  and 
erects  the  bugaboo  of  the  administrative  breakdown  of  personalty  taxa- 
tion as  part  of  the  system  of  a  general  property  tax,  and  then  points  to 
that  breakdown  as  if  the  evils  of  that  old  and  vicious  system  were  neces- 
sarily incident  to  the  administration  of  any  other  system  that  included 
personalty  as  a  subject  matter  of  taxation. 

^  It  has  been  said  for  years  that  personal  property  taxation  was  in 
Its  essence  a  maker  of  perjurers  and  tax-dodgers.  Men  would  make 
false  oath  about  their  property,  they  would  create  fictitious  debts  and 
fictitious  legal  residences,  they  would  even  move  their  homes  to  an- 
other state  and  from  one  state  to  another  in  quick  succession,  sooner 
than  obey  the  law  and  pay  their  share  of  the  cost  of  government.  Some 
of  this  criticism  was  just,  some  of  it  was  exaggerated,  and  some  of  it 
was  without  basis,  but  all  of  it  referred  to  the  always  high  and  often 
confiscatory  general  property  tax.  And,  in  our  judgment,  none  of  it 
can  be  fairly  made  to  apply  to  a  fair  and  just  low-rate  plan. 

76 


That  there  will  always  be  some  tax-dodgers  requires  no  denial. 
That  the  vast  majority  of  men,  treated  fairly  and  equally  by  the  gov- 
ernment, would  not  pay  their  proper  proportion  of  the  government's 
cost,  we  do  deny,  and  we  have  not  yet  been  given  any  evidence  that 
the  contrary  is  probable. 

If,  under  a  fair  and  just  low-rate  law,  properly  classified  as  between 
tangibles  and  intangibles,  and  classified  within  those  main  classes,  some 
men  would  become  residents  of  other  states  in  order  to  escape  pay- 
ment, it  would  not  be  long  before  those  other  states  sought  them  out  and 
made  them  pay.  The  same  increasing  burdens  of  government  are 
pressing  upon  all  the  states  and  communities  alike,  and  all  are  reaching 
out  for  additional  sources  of  revenue.  The  low-rate  plan  is  spreading 
from  state  to  state  and  in  a  little  while  there  will  be  no  safe  asylum  for 
the  weary  tax -dodger,  and,  in  our  opinion,  it  would  be  good  riddance 
for  any  state  or  community  to  be  free  of  him. 

Rhode  Island  was  formerly  a  haven  of  refuge  for  some  of  our  rich 
men.     And  Rhode  Island  has  recently  adopted  a  four-mill  personalty 

tax. 

In  so  far  as  concerns  corporations,  there  need  be  no  great  fear 
of  their  being  able  to  escape ;  they  are  creatures  of  the  state  and  thor- 
oughly within  its  control,  and  laws  can  be  amended  from  time  to  time 
so  as  adequately  to  forestall  dodging  by  them. 

Were  we  to  rely  wholly  upon  the  majority  report,  we  would  be 
forced  to  believe  that  personal  property  taxation  has  been  practically 
discarded  throughout  this  country,  and  that  in  the  few  states  in  which 
serious  effort  is  being  made  to  reach  personalty  under  more  modern 
methods,  and  at  a  low  rate,  the  attempt  has,  in  all  cases,  been  signally 
unsuccessful.  The  precise  contrary  seems  to  us  to  be  the  fact.  We 
take  the  liberty  of  quoting  from  the  memorandum  submitted  to  the 
Joint  Committee  on  Taxation  of  the  New  York  Legislature,  in  No- 
vember, 191 5,  by  A.  E.  Holcomb,  Treasurer  of  the  National  Tax  As- 
sociation, generally  conceded  to  be  one  of  the  foremost  taxation  au- 
thorities in  the  country: 

"The  plan  (classified  low-rate  tax)  is  one  which  has  had  the  en- 
dorsement of  practically  all  tax  investigating  bodies,  all  students  of 
taxation  and  all  experienced  tax  administrators  as  shown  by  the  litera- 
ture on  the  subject  during  recent  years.  In  very  many  states  the  con- 
stitutional limitations  have  been  such  as  to  require  the  same  general 
rate  upon  all  classes  of  property  and  in  these  states  preliminary  work 
has  been  necessary  to  secure  amendments  to  the  constitutions,  but  the 
avowed  purpose  has  uniformly  been  to  adopt  a  classified  tax  system.  In 
New  York  itself  reference  may  be  made  to  the  report  of  the  Commission 
on  New  Sources  of  Revenue  submitted  to  the  Mayor  of  the  City  of  New 
York,  in  January,  191 3,  which  recommended  a  3-mill  rate  on  per- 
sonalty with  no  debt  offset.  Furthermore,  the  tax  has  been  in  prac- 
tical operation  in  very  many  states  and  has  demonstrated  itself  as  a  rev- 
enue producer  and  what  is  equally  important,  as  an  efficient  agency  in 

77 


-r^' 


I'll  i' 

'I'M 


'3  If 


IP 


bringing  about  greater  equality  in  distributing  the  burdens  of  taxa- 

TtsniS^arftK^  ?°'*  immediate  interest  in  this  connection  are  the 

states     Thus  itT,!"^  ''  ^"^ r'^  *°  intangible  personalty  in   various 
states.     Ihus  it  has  been  applied  to  this  class  of  property  with  satis- 

year7andTore  '"  ^T'''''^^^  Pennsylvania  and  Maryland'oS  "a^^ 
years  and  more  recently  m  Mmnesota,  Rhode  Island  and  Iowa        It 

L-\^""   recognized  by  statute  and  appHed  to  some  extent  a  so   in 

s^v  ^h^at"^•f'''"^'^f•^"^  ^""^  ^°'-*'^  D^^°*-     It  is  pr'S  slfe  to 
say  that  if  constitutional  provisions   had    not  prevented,  the   system 

^s'eliZcJl  '"  °P''/''°"  '"  ^^"^^^'  Kentuck?.  Illinois  and  Indfan" 
Tn  finf  V        ^  '^""l  agitation  and  current  comment  in  those  states 
In  fine  it  represents  the  almost  universal  trend  of  public  opinion  and 
popular  judgment,  so  far  as  such  a  technical  and  at  the  same  tbie  high"y 
personal   subject  may  be  said  to  express  itself  in  a  definite  way  "      ^ 
The  short  experience  of  Maryland  with  a  very  defective  low-rate 
plan  IS  to  us  peculiarly  significant  as  showing  that  with  even  the  slight- 
est attempt  at  efficient  admisintration  the  property  sought  is  reachable, 
and  makes  practically  no  attempt  to  evade.    We  were  told  that  in  those 
parts  of  the  state  where  the  personalty  is  not  reached   it  is  wholly 
because  its  assessment  is  left  to  local  assessors  who  make  no  attempt 
to  enforce  the  law.    In  some  counties,  it  was  stated,  the  assessors  did 
not  even  know  of  the  law's  existence. 

ment'^b  th.l"  'h'?''"  ^"^  the  failure  to  reach  personalty,  in  our  judg- 
ment, s  that  while  persons  of  wealth  and  influence  have,  for  perfectly 
natural  reasons  of  selfish  concern,  been  doing  their  utmost  Lmake 
the  taxation  of  personalty  odious  and  impossible,  it  has  been  left 
to  no  one  .n  particular  to  do  what  he  individually  might  to  obtain 
the  substitution  for  the  archaic  general  property  tax  of  an  admini,- 

I  m™tTh  'n-r  '\'  ""°"^'"^  ^'^^^  ^^^^  Let  us  consider  for 
a  moment  the  conditions  that  exist  in  New  York. 

hopeSs  fumS"/n^'^''  ^^  personalty  taxation  law  in  this  State  is  a 

rela  Jd  eitrr^^  ""'''"u^  "'"'''''''  ^"^^^^  ^"  ^P^*^'  ^^^  wholly  un- 
related either  to  one  another  or  to  any  traceable  s(5heme  of  tax  leeis- 

ation.  One  man  has  his  property  in  notes,  or  credits,  or  s^ock  fn 
trade,  or  monies  in  bank,  and  he  pays  at  whatever  the  rate  for  th^ 
Lnl  7""  '''  !,\'"'  "^^'^'  ''^  ^'-^'     ^"-^h-  ^as  his  p  op  rty  in 

erty  if SoTd  h  T^  '^.^"-^^^  ^*  —  Another  has  h'isp^o" 
crty  m  railroad  bonds  and  he  pays  whatever  may  be  .50  divided  by 
the  number  of  years  the  bonds  have  to  run,  as  once  he  pays  the    50 

uL)  L:Z'r^  '^^  '"  ^^"^-  (^^^"^^^  ^^^*  Law'  r'eferred'to 
-^    I'u     ^  ^'  ^''  P'^P^'^y  ^"  ^^P^t^l  stock,  and  he  pays  nothing 

Neither  do  some  of  the  others  mentioned  if  they  have  "jEst^ debtee 

Due  largely  to  the  necessities  of  the  case,  caused  by  the  absence 
of  any  law  requinng  men  to  assess  themselves  on  their  oL  persSv 
by  means  of  compulsory  returns,  with  penalties  for  defau^tL  scheme 

78 


of  administration  of  our  personalty  tax  laws  is  not  short  of  laughable. 
The  City  Directory  and  the  telephone  book  have  been  our  main  sources 
of  information  as  to  possible  quarry.  A  high-sounding  name  or  a 
fashionable  address  produces  a  high  assessment.  One  of  the  undersigned 
never  was  assessed  except  when  he  lived  for  a  while  on  Fifth  Avenue, 
and  then  he  was  put  down  for  $50,000.  He  found  that  the  colored  jani- 
tor was  assessed  for  the  same  sum. 

The  law  practically  requires  the  continued  performance,  year  after 
year,  of  the  monstrous  farce  popularly  known  as  "swearing  off." 

The  whole  sorry  business  is  a  travesty  on  law  and  justly  breeds  a 
contempt  for  law. 

This  condition  has  existed  and  has  been  notorious  for  years  and 
yet  there  has  been  no  real  attempt  made  to  correct  it. 

Now,  either  there  was  some  quality  in  personalty  that  made  it 
naturally  exempt  from  taxation  or  there  was  not.     If  there  was  not,  it 
should   have  become   a  question   merely  of  what  the  rate   should  be, 
or  what  the  various  rates  should  be,  in  case  of  classification.     If  there 
were,  on  the  other  hand,  the  situation  should  have  been  frankly  faced 
with  insistent  demands  that  all  personalty  tax  law  be  abolished.  Neither 
of  those  courses  was  adopted.    Instead,  the  administrative  breakdown 
continued,  as  was  inevitable,  and  the  destructive  tinkering  at  the  law 
itself  went  on.    The  most  serious  of  these  statutes  was  that  creating 
the  Secured  Debt  Law,  passed  in  191 1.    When  it  was  passed,  the  vast 
majority  of  personalty  had  been  put  out  of  reach,  in  one  way  or  another, 
except  that  in  which  the  great  wealth  of  very  rich  men  is  most  apt  to 
be  invested.    Though  it  was  not,  in  fact,  paying  taxes,  the  great  volume 
of  income-producing  property  known  generally  as  "bonds"  was  subject 
to  taxation  as  was  other  property,  and  the  possibility  of  a  day  coming 
when  they  would  be  forced  to  pay  on  this  property  was  a  sword  hang- 
ing over  the  heads  of  many  affluent  citizens  who  were  not  paying  their 
just  share  of  the  burdens  of  government.    And  for  them,  or  if  not  for 
them  the  result  is  quite  the  same,  was  passed  this  law  allowing  them 
to  pay  a  tax  of  one-half  of  one  per  cent,  on  their  bonds  and  thus  secure 
exemption  during  the  life  of  the  securities,  and  more  extraordinary  still, 
even  that  pitiful  contribution  to  government  goes  wholly  to  the  State 
and  not  one  penny  of  it  to  the  cities  and  towns  where  these  men  live 
and  enjoy  security  of  life  and  protection  of  property  at  the  cost  of  the 
other  citizens. 

To  cite  a  concrete  example.  Mr.  Carnegie,  who  is  a  resident  of 
New  York  City,  pays  not  a  dollar  to  the  city  treasury  except  as  owner 
of  a  residence  here.  He  took  immediate  advantage  of  the  Secured  Debt 
Law  and  has  since  enjoyed  immunity  from  taxation  on  his  vast  wealth 
in  United  States  Steel  bonds  and  other  securities.  On  his  examination 
by  the  New  York  City  Tax  Board,  in  1912,  there  developed  the  grotesque 
situation  that  although  the  real  body  of  his  wealth  was  exempted  under 

79 


nHH 

li' 

• 

the  Secured  Debt  Law,  he  had  a  few  millions  lying  around  uninvested, 
but  that  this  was  beyond  the  reach  of  the  tax  assessor,  as  Mr.  Carnegie 
had  offsetable  "just  debts"  in  a  greater  sum  in  the  form  of  "agreements 
to  make  gifts,"  probably  for  some  of  his  justly  famous  libraries,  though 
that  is  not  stated. 

Now,  Mr.  Carnegie's  case  is  merely  referred  to  as  illustrative.  There 
are  thousands  of  men  and  women  in  this  city,  not  so  conspicuously  rich, 
of  course,  who,  in  the  same  way,  escape  payment  of  their  share  of  the 
cost  of  maintaining  the  city.  We  do  not  mean  to  impute  to  that  dis- 
tinguished gentleman  or  the  others  even  the  slightest  degree  of  dis- 
honesty or  of  lack  of  civic  spirit.  They  are  only  doing  what  any  normal 
human  being  would  do  in  the  circumstances. 

The  history  of  the  statute  known  as  the  Secured   Debt  Law,  to 
which  we  have  referred  several  times,  shows  how  alert  are  the  pos- 
sessors of  personal  wealth  to  secure  statutes  of  exemption,  and  how 
their  efforts  have  been  successful  chiefly  because  it  has  been  no  one's 
particular  business  to  see  that  personal  wealth  does  not  escape.     The 
Secured   Debt   Law  was  passed  in   191 1.     It  did   not  get  before  the 
Legislature  in  the  regular  way,  but  came  before  both  houses  under  an 
emergency  message  from  the  Governor,  a  device  so  fruitful  of  harm 
that  the  constitutional  delegates  in   1915    voted  to  abolish  it.    There 
was  no  publicity  given  to  the  measure,  nor  was  there  any  real  oppor- 
tunity afforded  the  public  of  opposing  it.    When,  however,  last  spring, 
a  small  but  determined  opposition  to  the  law  manifested  itself  before 
the  Legislature,  and  the  act  was  forced  out  into  the  open,  it  was  sub- 
stantially repealed,  although  those  who  were  profiting  by  it  succeeded  in 
continuing  the  exemption  of  bonds  already  taxed  under  it,  and  in  pro- 
curing an  amendment  under  which  bonds  paying  a  tax  of  three-fourths 
of  one  per  cent,  prior  to  October  ist,  191 5,  would  secure  an  exemption 
for  five  years.     We  do  not  believe  that  the  law,  either  as  originally 
passed  or  as  it  has  been  amended,  is  constitutionally  valid,  but  that  is 
not  a  matter  in  point  here.    We  are  merely  citing  this  statute  and  its 
short  history  as  illustrating  much  that  we  have  said  in  the  way  of  gen- 
eral statement. 

It  must  be  admitted  that  as  wealth,  for  reasons  that  no  one  could 
in  fairness  condemn,  has  been  consistently  arrayed  in  this  State  in  the 
effort  to  prevent  the  taxation  of  personalty,  it  is  only  reasonable  to  ex- 
pect that  the  bitterness  of  the  attack  upon  any  proposed  modernization 
of  personalty  taxation,  founded  upon  sanity  and  a  desire  to  be  fair, 
will  be  equalled  only  by  the  fear  that  such  a  reconstruction  of  the  per- 
sonalty taxation  laws  will  prove  not  only  popular  but  productive  of  vast 
revenue.  It  is  unfortunate  that  this  opposition  must  be  encountered, 
but  as  additional  revenue  must  be  raised,  the  issue  cannot  be  avoided, 
and  we  think  there  can  be  but  one  outcome.  And  the  low-rate  plan  is 
the  logical  way,  because  it  is  the  way  of  least  novelty  and,  therefore,  of 

80 


least  resistance.  There  has  been  much  foolish  over-statement  in  the 
opposition  to  the  taxation  of  property  as  such;  it  may  not  be  the  best 
way,  but  we  are  used  to  the  idea  in  general,  and  quite  content  with  the 
system  in  practice  as  it  affects  realty.  When  we  go  about  leaving  the 
taxation  of  property  behind  us,  let  us  do  it  in  the  reasonable  way  o£ 
following  the  line  of  normal  departure.  i 

To  quote  from  the  report  of  the  Mayor's  Commission  of  New  York 
City  made  in  1913: 

"The  most  equitable  conclusion  in  regard  to  the  matter  appears, 
therefore,  to  be  that  the  personal  property  tax  should  be  retained  on 
the  basis  of  a  low  uniform  rate,  until,  at  least,  some  very  desirable 
substitute  which  is  not  yet  in  sight  has  been  found." 

In  our  judgment,  no  "desirable  substitute"  is  yet  in  sight. 

We  will  now  answer  the  specific  objections  made  to  the  low-rate 
plan  in  the  majority  report. 

I.  The  so-called  listing  system.  This  is  the  objection  most  strong- 
ly urged  against  the  adoption  of  modernized  personalty  taxation.  Be- 
cause the  only  person  who  really  knows  what  he  possesses  is  required 
to  inform  the  assessor  as  to  his  taxable  holdings  it  is  claimed  by  many 
that  a  heinous  crime  against  personal  liberty  is  to  be  committed  in  the 
name  of  the  law!  This  species  of  attack  reacts  against  itself,  for  it 
must  be  obvious  that  the  only  personal  liberty  really  threatened  with  in- 
vasion is  the  liberty  to  dodge  taxation,  as  there  can  be  no  genuine  fear 
that  the  secret  information  of  the  return  will  be  spread  broadcast.  Pro- 
visions for  drastic  punishment  effectually  prevent  that.  No  one  com- 
plains that  his  Federal  income  tax  return  has  become  common  property, 
and  no  reason  is  given  in  the  majority  report  why  the  return  need 
be  less  secret  than  in  the  case  of  the  Federal  income  tax.  In  point  of 
fact,  the  really  feared  possessor  of  the  information  is  none  other  than 
the  tax  assessor.  Furthermore,  many  of  those  who  urge  this  so-called 
objection  are  not  consistent,  as  they  favor  an  income  tax  founded  on  the 
Wisconsin  model,  and  this  is  what  the  Wisconsin  Tax  Commission  says 
upon  the  subject  in  its  report  of  1912: 

"No  tax  measured  by  ability  to  pay  can  be  administered  without 
asking  searching  questions.  The  more  thoroughly  these  questions  are 
asked  the  more  certain  honest  people  can  be  that  the  tax  dodgers  are 
paying  their  fair  share.  If  taxation  is  confined  to  visible  things  alone, 
the  assessor  can  get  along  without  asking  questions;  but  such  pro- 
cedure would  exempt  from  taxation  many  of  the  wealthiest  and  ablest 
members  of  the  community.  When  an  assessor  is  trying  to  ascertain  1 
man's  income,  or  the  value  of  his  personal  property,  he  must  ask  either 
the  man  himself  or  the  man's  neighbors.  The  second  method  is  ob- 
noxious. The  open  way  is  to  put  the  taxpayer  himself  on  record.  This 
procedure  is  the  honest  man's  only  protection  against  the  tax  dodger. 
The  old  personal  property  tax  would  have  been  much  more  in- 
quisitorial than  the  income  tax  if  it  had  been  enforced.  It  failed  largely 
because  questions  were  not  asked ;  and  its  failure  resulted  in  large 
financial  burdens  being  shifted  from  the  shoulders  of  certain  classes  of 

81 


'  ♦ 


i'  ^ 


I 


li 


!h^rTi?"'- ^  ''"^''  '^'  shoulders  of  other  classes  far  less  able  to  bear 
them  The  income  tax  will  be  a  farce  if  searching  questions  are  not 
asked  and  answers  insisted  upon."  ^  questions  are  not 

We  also  deem  worthy  of  quoting  here  the  following  excerpt  from 
a  statement  made  by  the  present  Attorney  General  of  this  State,  Hon. 
t..  E.  Woodbury,  when  he  was  Chairman  of  the  State  Board  of  Tax 
Commissioners  (Vol.  2,  N.  T.  A.  Reps.,  page  153) : 

"I  am  aware  that  the  cry  will  at  once  go  up  in  oooosition  to  a 
Sr^hf:  7  ^^q"i^-"ent,  that  it  is  inquisitoriaHn  chaKr  but  w^ 
have  the  system  and  have  operated  under  it  for  years  as  af!ectinff  cor- 
ZTr  T-^'  "P  ^^  individuals,  and  will  soon  be%reparing  lists  Lder 
the  Federal  income  statute  of  the  most  inquisitorial  nature 

nronpri J!  ."J  ^"^"'^^^"^  condition  of  our  taxing  system  that  we  subject 
properties  of  varying  character  to  taxation,  and  require  our  taxine  offi- 

thSe  offi7  T  '^'?u  ^"'  '"""'^"^  P"^P^^^^  ^"^  ^'  '^'  same  time  Sfp^i^e 
those  officials  of  the  power  to  obtain  information  from  practically  the 

only  source  from  which  it  can  be  obtained^the  owner.  In  Sy  there 
L"^  J-  "''^-  •"  P""^*Pl^  between  requiring  an  owner  to  furnish  a 
nfent  nf  11'"."""^'^'  ^IJ"^  "'^^^^'^  ?"^  ^"  requiring  him  to  furnish  a  state- 
Z  I  ^V"^  consideration  paid  for  his  real  estate,  which  is  now  being 
advocated  by  many  of  those  who  oppose  a  listing  of  securities." 

2.  The  suggeston  that  a  man  subject  to  a  four-mill  tax  is  almost 
as  likely  to  want  to  evade  as  if  he  were  subject  to  a  twenty-mill  tax  is 
not  convincing.  Further,  we  think  a  two-mill  rate  would  prove  suffi- 
cient. 

3.  The  claim  that  the  low-rate  plan  would  jeopardize  the  commer- 
cial  interests  of  the  city  is  a  familiar  assertion  as  to  anything  new  is 
never  supported  by  attempt  at  proof,  and  could  apply  equally  well'  to 
any  new  kind  of  taxation.  A  similar  claim  was  made  when  the  stock 
transfer  tax  was  enacted,  but  Wall  Street  has  not  yet  gone  to  Jersey 
City,  and  we  do  not  believe  it  ever  will.  The  City  of  New  York  is  not 
a  boom  town  that  is  made  or  unmade  overnight. 

4.  There  is  no  genuine  "problem  of  debts."  We  believe  there  is 
only  one  state  other  than  New  York  which  allows  general  debt  deduc- 
tion. Some  states  allow  the  deduction  of  debts  against  credits,  and 
stop  sharply  there.  The  New  York  debt  deduction  is  not  a  breeder  of 
perjury;  it  is  much  more.  It  is  an  invitation  to  swear  oflF.  If  it  can 
be  shown  that  in  certain  classes  of  mercantile  cases  there  might  be  some 
hardship  due  to  the  elimination  of  debt  deduction,  such  proof  could  be 
met  by  proper  special  treatment  in  any  bill  that  may  be  enacted.  A 
hke  special  treatment  may  be  accorded  to  dealers  in  securities.  But 
general  debt  deduction  is  a  device  of  exempters  and  not  of  taxers. 

5.  The  statement  that  no  property  is  reachable  except  realty  may 
be  substantially  accurate  in  so  far  as  it  refers  to  the  confiscatory  high 
general  property  rate,  but  it  is  negatived  as  to  a  low  rate  by  the  ex- 
perience of  Maryland  and  other  states.  The  experience  of  Iowa,  referred 
to  m  the  majority  report,  is  of  no  significance  to  those  familiar  with  the 

82 


statute  in  that  state.  The  plan  there  in  use  is  bad  in  many  important 
particulars,  as,  for  example,  that  large  and  unnecessary  debt  deductions 
are  allowed,  the  rate  is  comparatively  high  (5  mills),  and  many  f^lasses 
of  property  are  exempted.  We  agree  with  the  statement  that  the  ten- 
dency of  the  present  day  is  to  tax  according  to  ability,  but  we  assert 
that  a  proper  low-rate  plan  is  based  upon  the  same  theory  of  ability  as 
that  upon  which  the  direct  income  tax  plan  rests,  and  would,  in  the 
opinion  of  many  who  believe  in  taxation  according  to  ability,  work  out 
as  fairly  in  that  respect  as  would  a  direct  income  scheme.  And  we  do 
not  believe  that  a  direct  state  income  tax  is  now  feasible.  The  prob- 
lems created  by  the  nature  of  the  form  of  government  in  the  United 
States,  under  which  a  state  is  sovereign  within  certain  limits,  and  very 
powerless  beyond  those  limits,  have  convinced  many,  if  not  most,  men 
who  have  studied  the  subject  that  a  state  income  tax  cannot  be  operated 
successfully,  if  at  all,  without  years  of  experimentation  and  adjustment 
to  the  peculiar  conditions  encountered,  and  possibly  without  amendment 
to  the  Federal  Constitution. 

6.  If  "those  who  are  in  possession  of  large  incomes  from  salaries 
or  professional  exertions"  (and  presumably  accumulating  nothing,  as 
otherwise  we  do  not  get  the  point  of  the  objection)  spend  all  they  re- 
ceive, the  community  is  not  harmed  as  the  money  becomes  invested  in 
other  hands  and  thus  does  not  escape  taxation. 

7.  The  claim  that  the  low-rate  plan  will  yield  no  substantial  rev- 
enue is  as  unsupported  by  proof  as  are  the  confident  assertions  made  in 
the  other  direction  on  behalf  of  the  income  tax.  Mr.  Holcomb  and  many 
other  authorities  believe  that  a  very  large  revenue  would  be  produced  by 
the  low-rate  tax.  The  State  Tax  Commissioner  of  Massachusetts  has 
figured  that  in  his  state  the  amount  of  personalty  is  three  and  a  half 
times  greater  than  that  of  realty.  In  the  City  of  New  York,  it  is  gen- 
erally conceded,  the  proportion  in  favor  of  personalty  would  be  much 
greater.  Figured  at  five  to  one,  we  would  have  forty  billions  in  this 
city  alone.  The  probable  yield  at  a  two-mill  rate  for  the  city  alone  has 
been  variously  estimated  at  from  $20,000,000  to  $40,000,000,  but  we  arc 
dealing  with  such  vast  possibilities  that  no  one  can  do  more  than  guess. 
If  we  would  measure  probable  results  by  the  fear  of  those  results,  the 
yield  would  certainly  be  large. 

In  conclusion,  we  wish  to  point  out  that  no  claim  is  made  by  the 
majority  that  the  modernized  personalty  tax  would  be  an  administrative 
failure  because  of  the  necessity,  under  our  State  Constitution,  of  assess- 
ment by  local  officials.  While  we  formerly  had  some  doubt  upon  the 
subject,  we  do  not  now  believe  that  in  the  case  of  the  low-rate  plan  such 
an  objection  actually  lies.  The  local  assessor  is  quite  capable  of  deal- 
ing with  the  situation,  if  he  wants  to.  Hitherto,  he  has  not  wanted  to. 
But  the  compulsory  return  feature  would  oblige  him  to  deal  with  the 
matter,  whether  he  wanted  to  or  not.    This  would  make  it  useless  for  a 

83 


i 


11 


i  ■' 


w 


II 


i5j 


•lii 


'Mil 


ill 


III 


• 

resident  of  New  York  City  to  move  to  Nassau  or  Westchester  or  some 
other  county  where  they  do  not  need  much  revenue.  And  a  simple 
amendment  vesting  in  the  State  Tax  Commission  or  other  body  power 
to  act  as  mvestigators  of  the  local  assessors,  without  authority  to  change 
an  assessment,  but  with  power  to  report  and  prosecute  charges,  would 
undoubtedly  accomplish  any  needed  change  in  the  point  of  view  of  the 
local  official  without  violating  the  rights  he  has  under  the  State  Consti- 
tution.  A  few  removals  and  prosecutions  for  nonfeasance  or  malfeasance 
would  brmg  about  whatever  might  be  needed  in  the  way  of  reform 
Furthermore,  the  person  assessed  may  be  relied  upon  to  desire  to  keep 
himself  out  of  trouble. 

GEO.  V.  MULLAN, 
JOHN  J.  HALLERAN, 
COLLIN  H.  WOODWARD. 

CLASSIFIED  PERSONAL  PROPERTY  TAX. 

Dissenting  Memorandum  By  Mr.  Tomlin. 

Nothing  that  has  been  said  in  our  discussions,  nor  have  I  read  any- 
thing that  convinces  me  a  personal  property  tax  cannot  be  collected 
The  collection  of  this  tax  should  be  prosecuted  with  the  same  vigor 
as  any  other  kind  of  tax.  Judging  from  the  evidence  no  such  attempt 
has  ever  been  made  in  this  or  any  other  state.  Proper  laws,  a  loyal  atti- 
tude on  the  part  of  the  courts  and  efficient  administration  would,  I  be- 
heve,  result  in  collecting  a  four-mill  tax  on  personal  property.  I  am  in 
favor  of  such  a  tax. 

FRANKLIN  S.  TOMLIN. 

CLASSIFIED  PERSONAL  PROPERTY  TAX. 
Dissenting  Memorandum  By  Mr.  Shipley. 
I  believe  that  a  tax  of  from  two  to  four  mills  upon  variously  classi- 
fied tangible  and  intangible  property,  without  deduction,  but  with  cer- 
tain equitable  exemptions,  would  be  very  simple  of  administration  and 
easily  provide  the  needed  revenue,  as  well  as  bear  evenly  and  lightly 
upon  the  city^s  activities.  The  success  of  the  present  one  per  cent,  tax 
upon  bank's  capital,  surplus  and  undivided  profits  may  be  cited  as  an 
example.  This  is  the  simplest  and  relatively  the  most  profitable  of 
all  of  our  present  forms  of  taxation. 

FREDERIC  B.  SHIPLEY. 

CLASSIFIED.  PERSONAL  PROPERTY  TAX. 
Memorandum  By  Mr.  Binkerd. 
If  the  personal  property  tax,  which  is  iniquitous  in  theory  and  prac- 
tice alike,  must  be  retained,  then  I  certainly  concur  in  the  proposal  to 
lower  the  rate. 

ROBERT  S.  BINKERD. 

84 


3.    THE  ABILITY  OR  PRESUMPTIVE  INCOME  TAX. 

Majority  Report. 

If  the  direct  income  tax  is  found  to  be  impossible,  your  Committee 
would  repeat  its  recommendation  of  last  winter,  viz.,  that  the  State  per- 
mit the  City  of  New  York,  as  well  as  the  other  cities  if  they  so  desire,  to 
reach  incomes  indirectly  rather  than  directly  by  the  so-called  Ability  or 
Presumptive  Income  Tax.  Several  members  of  your  Committee  would 
even  go  so  far  as  to  prefer,  under  actual  conditions  in  New  York,  the 
Ability  Tax  to  the  Income  Tax. 

What  is  here  called  the  Ability  Tax  is  a  tax  on  the  abilities  of 
those  who  benefit  from  the  opportunities  afforded  by  the  City  of  New 
York.  Conceding  that  the  fairest  test  of  ability  to  pay  is  income,  the 
proposition  here  is  to  reach  the  income  indirectly  and  by  outward  signs 
or  criteria,  utilizing  certain  definite  facts  of  expenditure  as  affording 
some  indication  of  relative  income.  The  Ability  Tax  as  a  presumptive 
income  tax  would,  therefore,  be  composed  of  three  parts,  viz.:  (I)  the 
Habitation  Tax,  (II)  the  Occupation  Tax,  and  (III)  the  Salaries  Tax, 
with  provisions  by  which  only  one  of  these  taxes  would  be  payable  by 
any  particular  person. 

I.    THE    HABITATION    TAX. 

The  Habitation  Tax  is  a  tax  upon  individuals  occupying  habitations 
— that  is,  houses  or  apartments  for  residential  purposes.  The  tax  pro- 
ceeds upon  the  theory  that  what  a  man  spends  for  rent  is  a  rough  indi- 
cation of  his  ability  to  contribute  to  the  public  burdens.  Inasmuch,  how- 
ever, as  the  ratio  of  house  rent  and  income  decreases  as  the  amount  of 
rent  increases — that  is,  inasmuch  as  people  with  smaller  incomes  must 
spend  a  relatively  larger  share  of  their  income  for  rentals,  it  is  obvious 
that  in  order  to  secure  approximate  justice  the  tax  must  be  rather  sharply 
graduated,  so  that  the  tax  will  increase  not  only  in  proportion  to  the 
rental,  but  more  than  in  such  proportion. 

The  schedule  of  the  tax  ought  to  be  so  arranged  that  every  indi- 
vidual will  pay  a  sum  that  is  about  equivalent  to  one  per  cent,  of  his 
income,  as  indicated  by  his  house  rent.  According  to  the  consideration 
just  mentioned,  the  real  income  of  the  taxpayers  may  be  considered  to 
increase  at  a  greater  rate  than  do  the  rentals  which  they  pay.  If,  for 
instance,  we  assume  that  for  the  more  modest  rentals  a  man  spends  about 
a  fifth  of  his  income  for  his  house  rent,  we  would  have  to  multiply  the 
yearly  rental  by  five  in  order  to  get  his  presumptive  income.  In  the 
case  of  the  higher  rentals  the  multiplier  would  have  to  be  more  than 
^vt,  running  up  to  six,  seven,  eight,  nine,  ten,  and  even  more,  as  in 

85 


'   d 


i 


IH,: 


m 


the  latter  case  of  rather  expensive  rentals  it  is  to  be  assumed  that  a 
man  s  income  would  be  at  least  ten  times  and  more  the  amount  of  rent 
that  he  pays.  The  tax,  therefore,  will  have  to  be  based  upon  a  progres- 
sively graduated  scale,  so  that  the  higher  the  house  rent  the  progres- 
sively higher  would  be  the  amount  of  tax. 

In  order,  however,  to  prevent  miscarriages  of  justice  and  to  obviate 
the  criticism  that  the  presumptive  income  may  be  far  from  being  the 
real  income,  and  that  two  men  living  in  precisely  similar  houses  may 
yet  have  very  different  real  incomes,  it  should  be  provided  that  if  any- 
one  finds  that  the  tax  which  he  is  called  upon  to  pay  amounts  to  more 
than  one  per  cent,  of  his  actual  income,  he  shall  have  the  right  to  declare 
and  to  prove  his  actual  income  and  to  have  his  tax  reduced  to  one  per 
cent,  of  his  income.  This  would  happen  in  only  a  comparatively  few 
cases,  but  would  effectually  dispose  of  the  criticism.  This  provision  is 
not  found  in  the  draft  bill  herewith  appended,  but  should  be,  and  could 
easily  be,  added  thereto. 

It  is  further  provided  that  if  a  man  lives  in  his  own  house,  the  rental 
value  shall  be  calculated  at  7  per  cent,  of  the  assessed  value  of  the  prop- 
erty.    Provision  is  also  made  for  people  who  live  in  hotels  or  apartments 
and  the  tax  should  be  applicable  to  those  who  have  occupied  apart- 
ments continuously  for  at  least  three  or  four  months. 

Several  criticisms,  which,  however,  are  not  valid,  might  be  urged 
against  the  Habitation  Tax.  In  the  first  place,  it  might  be  alleged  that 
the  tax  IS  a  tax  on  the  poor  man.  In  reality,  however,  the  opposite  is 
the  case.  Under  the  project  of  your  Committee,  all  rentals  below  $50  a 
month,  that  is,  $600  a  year,  are  entirely  exempt  from  taxation.  This 
corresponds  to  a  total  expenditure  of  from  $2,500  to  $3,000.  Every  one, 
therefore,  with  a  presumptive  income  under  this  amount  will  pay  no  tax 
at  all.  Moreover,  the  amount  of  tax  on  slightly  higher  rentals  is  exceed- 
ingly moderate,  because  of  the  fact  that,  according  to  our  recommenda- 
tion, $2,000  should  be  exempted  in  every  case  from  the  presumptive  in- 
come  in  order  to  reach  the  taxable  income.  On  the  very  high  rentals, 
however,  this  exemption  is  of  no  importance,  and  the  tax  will  be  very 
much  greater.  From  the  scale,  which  is  worked  out  in  detail  in  the 
bill  appended  hereto,  we  make  the  following  extracts  to  show  the  opera- 
tion of  the  law : 


Rental.  Multiplier.      Presumptive  Income.  Taxable  Income.  Tax. 


$600- 

$700 

5 

$3,500-2,000 

700- 

800 

5 

4,000-2,000 

1,000- 

1,100 

5 

5,500-2,000 

2,000- 

2,100 

5.1 

10,710-2,000 

2.900- 

3,000 

5.5 

16,500-2,000 

4,000- 

4,100 

6 

24,600-2,000 

10,000- 

10,200 

8 

81,600-2,000 

25,000- 

26,000 

17 

442,000-2,000 

90,000- 

100,000 

17 

1,700,000-2,000 

$1,500 

5 

2,000 

10 

3,500 

30 

8,710 

ST 

14.500 

14S 

22,600 

826 

79,600 

796 

440,000 

4.400 

1,688,000 

16,880 

86 


From  the  above  table,  therefore,  it  will  be  seen  that  the  Habitation 
Tax  entirely  exempts  all  these  with  incomes  under  $2,500  or  $3,000 ;  that 
it  imposes  an  insignificant  burden  on  those  with  an  income  between 
$3,000  and  $6,000  or  $7,000  a  year,  and  that  it  considerably  increases 
the  burden  as  the  income  augments.  The  Habitation  Tax  is  thus  not  a 
tax  upon  the  poor  man  and  not  an  appreciable  burden  upon  those  in 
moderate  circumstances. 

In  the  second  place,  it  might  be  alleged  that  the  Habitation  Tax 
falls  upon  the  real  estate  owner  for  the  reason  that  a  prospective  tenant 
of,  let  us  say,  a  $650  apartment,  would  insist  upon  having  his  rent  reduced 
to  $600  in  order  to  escape  the  tax.  This  argument,  however,  is  to  a  great 
extent  fallacious. 

As  a  matter  of  fact,  the  $650  tenant  will  never  secure  the  owner's 
consent  to  a  reduction  of  $50  in  rent  in  order  to  enable  the  tenant  to 
save  $5  in  taxes.    The  same  would  be  true  even  more  of  higher  rentals, 
because,  according  to  the  scale  proposed,  a  reduction  of  every  $100  in 
rental  would  involve  the  saving  of  only  $5  in  each  case.    So  that  even 
at  the  very  worst  it  would  only  be  at  the  margin  of  each  class  of  tenants 
that  there  would  be  any  pressure  at  all  to  demand  a  reduction  of  rent. 
But  even  this  is  open  to  considerable  doubt.    The  only  way  in  which  a 
landlord  could  be  induced  to  grant  a  reduction  of  rent  would  be  through 
the  fear  of  having  his  apartments  vacated.    If,  however,  the  tenants  of 
a  particular  grade  of  apartments  would  actually  be  induced  to  move  to 
a  lower-priced  apartment  because  of  the  tax,  the  place  vacated  by  them 
would  be  filled  by  the  influx  of  tenants  from  the  next  higher  grade  of 
apartments  that  would,  under  the  hypothesis,  in  like  manner  be  induced 
to  seek  lower-priced  apartments.    The  fact  that  there  are  relatively  less 
higher-priced    apartments    would    only    slightly   retard    this    tendency. 
Therefore,  what  might  possibly  be  lost  in  one  way  would  in  large  meas- 
ure be  gained  in  the  other,  and  the  only  apartments  which  might  suffer 
a  possible  reduction  of  rental  because  of  a  threatened  disappearance  of 
their  tenants  would  be  the  highest-priced  apartments  in  the  city.    These, 
however,  are  occupied  by  the  wealthiest  classes,  and  the  amount  of  taxes 
to  which  they  would  be  subjected  would  be  such  a  small  proportion  of 
their  entire  income  as,  in  all  probability,  to  lead  to  no  such  transfer  at  all. 
Thus  it  will  be  seen  that  the  argument  that  the  Habitation  Tax  falls 
on  the  real  estate  owner  is  largely  fallacious.    If  it  is  shifted  at  all  to  the 
real  estate  owner,  only  a  small  part  will  fall  upon  him  and  the  rest 
will  still  be  paid  by  the  tenant,  while  only  the  owners  of  the  most  expen- 
sive apartments  could  suffer.    But  even  these,  as  we  have  seen,  will  prob- 
ably not  suffer  at  all,  or  to  any  perceptible  degree. 

Above  all,  however,  it  must  be  remembered  that  even  if  it  is  true 
that  the  Habitation  Tax  would  fall  to  a  very  slight  extent  on  the  real 
estate  owner,  it  is  a  question  of  choice  between  the  Habitation  Tax  and  an 
increased  rate  on  real  estate.    If  the  additional  revenue  must  be  raised  by 

87 


!   ■'(' 


a  direct  tax  which  is  practically  a  tax  on  real  estate,  the  real  estate 
owner  will  have  to  pay  all  of  it.  If  the  necessary  revenue  is  derived 
from  a  Habitation  Tax,  the  real  estate  owner  will  at  the  very  worst  pay 
only  a  sma  1  part  of  it,  and,  in  all  probability,  as  we  have  seen,  he  will 
pay  none  of  it  As  between  the  Habitation  Tax,  therefore,  and  the  real 
estate  tax  the  Habitation  Tax  is  in  the  interest  of  the  real  estate  owner. 
The  Habitation  Tax  is,  therefore,  not  a  tax  on  the  poor  man,  nor  is 
It  a  tax  on  the  real  estate  owner.  It  is  a  tax  on  the  presumptive  income 
of  everybody  who  resides  in  New  York  City.  Its  chief  value,  as  com- 
pared with  our  present  system  of  taxation,  is  that  it  reaches  the  man 
who  IS  not  m  business  in  New  York  City  and  also  that  it  reaches  the  rich 
man  who  now  escapes  taxes  entirely  by  living  here  and  claiming  a  resi- 
dence outside  of  New  York.  The  Habitation  Tax  does  not  depend  upon 
legal  residence.  It  must  be  paid  by  all  with  incomes  of  approximately 
p,500  to  $3,000  who  rent  apartments  or  who  live  even  for  a  limited  time 
m  New  York  City. 

The  Habitation  Tax,  however,  will  not  affect  those  who  earn  their 
living  m  New  York  City  but  who  do  not  live  here.  These  classes  also 
possess  an  ability  which  ought  to  be  reached,  and  in  the  City  of  New 
York  they  form  an  exceptionally  numerous  class.  These  it  is  proposed 
to  reach  by  ^ 

II.  THE  OCCUPATION  TAX. 
This  is  a  tax  on  the  premises  occupied  for  business  or  for  securing 
a  livelihood.  It  reaches  the  non-resident  and  the  resident  alike.  Your 
Committee,  after  considering  the  various  methods  employed  in  different 
parts  of  the  world,  have  come  to  the  conclusion  that  the  Occupation  Tax 
should  be  levied  on  the  basis  of  the  annual  rental  value  of  the  business 
premises.  In  some  of  the  Canadian  and  European  cities  where  this  tax  is 
m  force,  an  attempt  has  been  made  to  graduate  the  Occupation  Tax 
according  to  the  character  of  the  business,  on  the  assumption  that  differ- 
ent  businesses  will  require  varying  degrees  of  floor  space  for  their  pur- 
poses. After  a  study  of  the  world's  experience,  your  Committee  have 
come  to  the  conclusion  that  the  greater  degree  of  theoretic  fairness  which 
would  follow  from  such  a  system  of  classification  would  be  more  than 
outweighed  by  the  complexity  of  the  scheme  and  by  the  inability  after 
all  to  secure  exact  justice.  Your  Committee,  therefore,  believe  that  we 
should  follow  the  example  of  the  most  important  cities,  and  should 
impose  a  flat  tax  on  business  rentals.  We  accordingly  suggest  a  tax  of 
7%  of  the  annual  rental  value  of  all  business  premises,  and  we  propose, 
in  order  to  lighten  the  burden  on  the  small  man,  a  deduction  of  $20  tax 
in  every  case,  with  a  complete  exemption  of  all  business  rentals  up  to 
$50  a  month. 

The  Occupation  Tax,  it  will  be  seen,  is,  therefore,  not  a  tax  upon 
the  small  business  man.    Business  premises  are  liable  to  be  taxed  only 

88 


when  the  rent  exceeds  $50  monthly,  or  $600  a  year,  and  as  the  tax  is 
levied  at  the  rate  of  7%  only  on  the  rental  exceeding  that  sum,  with 
the  further  provision  that  $20  is  deducted  in  every  case,  the  amount  of 
the  tax  would  be  insignificant  on  even  the  more  moderately  successful 
business  man.  With  business  rentals  of  $1,000  a  year,  for  instance,  the 
tax  will  be  only  $50.  Where  a  man  occupies  his  own  building  for  busi- 
ness purposes,  or  for  purposes  of  a  livelihood,  the  rental  value  is  esti- 
mated, as  in  the  case  of  the  Habitation  Tax,  at  7%  of  the  assessed  valua- 
tion. Moreover,  if  a  person  is  subject  to  both  the  Habitation  Tax  and 
the  Occupation  Tax,  he  may  deduct  the  one  from  the  other.  Finally, 
it  may  be  pointed  out,  that  in  the  Occupation  Tax,  as  in  the  Habitation 
Tax,  if  any  one  should  be  held  to  pay  a  tax  on  his  personal  property,  he 
would  be  entitled  to  deduct  the  amount  of  the  personal  property  tax 
from  the  Occupation  Tax  or  the  Habitation  Tax  as  may  be. 

It  may  be  conceded  that  the  Occupation  Tax  is  not  an  ideal  tax, 
but  it  must  be  remembered  that  it  is  far  better,  even  so  far  as  the  busi- 
ness man  is  concerned,  than  a  tax  on  personal  property  or  a  tax  on  his 
stock  in  trade.  At  the  present  time,  the  business  man  contributes  virtu- 
ally nothing  to  the  expenses  of  the  city.  An  attempt  to  tax  him  on  his 
stock  in  trade  without  deduction  for  debts,  which  would  be  a  result  of 
levying  a  tax  on  his  tangible  property,  would  be  both  more  onerous  and 
less  equitable  than  the  Occupation  Tax. 

Neither  the  Occupation  Tax  nor  the  Habitation  Tax  would,  how- 
ever, reach  the  salaried  classes  who  secure  large  incomes  in  New  York 
City,  and  who  neither  live  in  New  York  nor  themselves  pay  any  rent  for 
business  purposes.  All  these,  for  instance,  who  receive  large  salaries 
from  corporations  would  be  exempt  from  taxation.  Your  Committee  feel 
that  this  would  be  unjust  and  they,  therefore,  recommend  an  addition  to 
the  Habitation  Tax  and  the  Occupation  Tax  of 


t 

r    I 


III.    A   SALARIES   TAX. 

This  is  a  tax  on  all  salaries  paid  or  received  in  the  City  of  New  York 
except  salaries  paid  by  the  Federal  Government.  The  exemption  should 
be,  in  all  cases,  about  $2,000,  and  the  tax  should  be  graded  from  the  rate 
of  one  per  cent,  up  to  the  figure  of  five  per  cent,  on  the  excess  of  all  sal- 
aries over  $30,000.  Provision  is  made  in  our  bill  for  the  reporting  of 
salaries  by  employers  and  for  the  withholding  by  them  of  the  tax  at 
the  source. 

As  before,  where  the  taxpayer,  subject  to  the  Salaries  Tax,  is  sub- 
ject to  either  the  Habitation  Tax  or  the  Occupation  Tax,  he  may  deduct 
the  one  from  the  other;  and,  in  the  same  way,  he  may  also  deduct  any 
tax  that  he  happens  to  pay  on  his  personal  property. 

Here,  again,  several  possible  misconceptions  ought  to  be  removed. 
In  the  first  place,  it  would  not  be  true  to  state  that  the  Salaries  Tax 
is  a  tax  on  the  small  man.    Since  all  salaries  up  to  $2,000  are  exempt,  and 

89 


Iff 


iltl 


ili 


I'l 


It 


Since  the  rate  is  only  one  per  cent,  on  the  excess  over  that  amount,  the 
recipient  of  even  a  $3,000  salary  would  pay  only  $10  a  year  as  his  entire 
tax  to  the  city.  On  the  other  hand,  higher  salaries,  like  that  of  the 
more  successful  professional  man  and  of  the  well-paid  corporation 
officials  are  taxed  at  considerably  greater  figures.  The  Salaries  Tax  is, 
therefore,  in  reality  a  tax  upon  large  incomes  derived  from  personal 
exertion.    It  is  a  tax  upon  the  wealthier  classes,  not  upon  the  poor  man. 

In  the  second  place,  it  would  be  equally  fallacious  to  state  that  sal- 
aries are  taxed  while  other  incomes  are  not  taxed.  Business  incomes  are 
supposed  to  be  reached  by  the  Occupation  Tax ;  other  incomes,  in  gen- 
eral,  by  the  Habitation  Tax.  Nobody  has  to  pay  more  than  one  of  these 
three  taxes.  The  purpose  of  the  Salaries  Tax  is  not  to  single  out  for 
taxation  people  with  salaries,  but,  on  the  contrary,  to  prevent  people 
with  large  salaries  from  entirely  escaping  taxation— especially  the  recipi- 
ents of  large  salaries  in  this  city  who  live  outside  of  New  York  City. 
The  Salaries  Tax,  instead  of  being  an  unequal  tax  on  a  special  class,  is 
an  endeavor  to  secure  equality  of  taxation  by  reaching  those  who  would 
otherwise  escape. 

If  we  consider  the  Ability  or  Presumptive  Income  Tax  in  general 
as  to  all  of  these  three  parts,  it  will  be  realized  that  it  has  two  great 
advantages.  In  the  first  place,  it  will  be  exceedingly  easy,  as  well  as 
inexpensive,  to  administer.  Moreover,  it  can  be  readily  executed  by  the 
city  officials  without  any  necessity  of  depending  upon  the  State  admin- 
istration. As  regards  its  practicability,  its  certainty,  and  its  inexpensive- 
ness,  it  satisfies  three  of  the  cardinal  rules  of  taxation. 

In  the  second  place,  the  revenue  will  be  large.  Your  Committee 
estimate,  on  the  basis  of  figures  furnished  to  them  by  the  Internal  Rev- 
enue Department  at  Washington,  that  in  the  City  of  New  York  alone,  at 
the  rate  suggested,  the  revenue  would  be  from  $20,000,000  to  $25,000,000. 

In  the  face  of  these  great  advantages,  the  only  possible  objection  to 
the  scheme  is  that  it  is  not  absolutely  equal.  We  concede  this  at  once, 
but  urge  its  other  advantages.  Theoretically,  our  Personal  Property  Tax 
is  in  many  respects  unobjectionable,  but  in  actual  operation  it  is  open  to 
the  gravest  criticism.  We  must  remember  that  a  fairly  rough  approxi- 
mation to  justice  which  is  administratively  simple  and  workable  is  far 
better  than  a  more  ideal  scheme  which  does  not  work  out  in  practice. 
Under  our  present  system  vast  classes  of  the  population  escape  and  a 
very  small  proportion  of  the  population  bears  the  burden.  Under  the 
scheme  herewith  submitted,  many  classes  will  be  reached  who  now  are 
not  reached,  and  while  ideal  justice  will  not  be  attained,  a  step  forward 
will  have  been  taken.  As  in  every  question  of  tax  reform,  we  must  con- 
sider the  proposition  not  from  the  point  of  view  of  ideal  justice,  but 
from  that  of  substantial  progress.  It  is  easy  to  criticise  any  project  for 
reform,  but  it  is  far  more  difficult  to  submit  a  constructive  proposal.    We 


ask  that  the  entire  scheme  be  regarded  from  the  point  of  view  not  of  the 

ideal  but  of  the  practicable. 

ALFRED  E.  MARLING, 
EDWIN  R.  A.  SELIGMAN, 
FRANK  HARVEY  FIELD, 
JOSEPH  N.  FRANCOLINI, 
JOHN  J.  HALLERAN, 
HAMILTON  HOLT, 
JEREMIAH  W.  JENKS, 
WALTER  LINDNER, 
CYRUS  C.  MILLER, 
DAVID  RUMSEY, 
OSCAR  R.  SEITZ, 
F.  S.  TOMLIN. 
CHARLES  T.  WHITE. 


ABILITY   TAX. 

Concurring  Memorandum  By  Mr.  Simon. 

In  expressing  my  opinion  as  to  the  Ability  or  Presumptive  Income 
Tax,  I  am  assuming  that  the  schedule  part  of  the  Habitation  Tax  is 
merely  tentative  and  for  illustrative  purposes.  These  figures,  in  my 
opinion,  may  need  revision. 

ROBERT  E.  SIMON. 

ABILITY   TAX. 

Concurring  Memorandum  By  Messrs.  Purdy  and  Kline. 

We  concur  in  the  recommendation  that  cities  be  permitted  to  levy 
a  presumptive  income  tax  as  a  substitute  for  the  personal  property  tax. 

LAWSON  PURDY, 
ARDOLPH  L.  KLINE. 


ABILITY   TAX. 

Memorandum  By  Mr.  Binkerd. 

As  a  permanent  part  of  the  city's  revenue  system,  I  am  opposed 
to  the  proposed  ability  tax.  As  a  temporary  measure  to  meet  the  extraor- 
dinary demands  of  the  next  few  years,  I  would  support  it,  if  accom- 
panied at  least  by  an  unearned  increment  tax  as  a  permanent  part  o£ 
the  city's  revenue  system,  and  eventually  supplanting  the  ability  tax. 

ROBERT  S.  BINKERD. 


ii    -n 


90 


91 


'I 

■ ; 


41' 


Hi  I 


,  ( 


■m 


ABILITY   TAX. 

Dissenting  Memorandum  By  Messrs.  Leubuscher  and  Howe. 

The  presumptive  income  taxes  are  illogical  and  unjust.  The  major- 
ity  designate  them  '^ability"  taxes.    They  are  only  liability  taxes.  ^ 

A.  THE   HABITATION    TAX. 

.n  ,•  ^^'  "^ff^  "''''  '^^'  '^'  P'^"^""*  ^^  $^  ^  y^^'  rent  presupposes 
an  mcome  of  $.,500  to  $3,000,  and  say:  "Everyone,  thereforc,'with'a  pre- 

room.1h  r       '^'  "'"^""'^  '^"*  "  ^^'^'  ^^^iJy  ^eq^i^es  more 

rooms  than  a  small  one  and  must  pay  more  rent  therefor;  and  the  bigger 

amilv'^T  r  "f '  '''  ^"^^^  ^'^  ^^^^^  "^^-^-y  -P^-^es  fo?  a 
amily.  In  the  case  of  maried  men,  the  amount  paid  for  rent  is  there- 
fore usually  as  evidence  of  inability  to  pay  taxes.  In  the  case  of 
single  men,  the  rent  paid  may  not  be  any  criterion.  A  bachelor  earning 
$  aooo  would  not  usually  pay  over  $1,500  for  rent,  or  about  one^seventh 
of  his  income,  while  a  married  man  with  a  wife  and  three  children  to 
support  on  a  salary  of  $5,000  would  pay  about  the  same  rent,  and  that  is 
nearly  one-third  of  his  income. 

The  $30  Habitation  Tax  on  the  married  man  is  a  vastly  heavier 
burden  than  the  $30  Habitation  Tax  on  the  bachelor. 

The  Habitation  Tax  violates  the  primary  sanction  of  justice  recog- 
nized  in  the  provisions  of  nearly  all  income  tax  laws  which  place  the 
exemption  for  married  men  higher  than  for  single  men,  and  the  provi- 
sion  of  most  income  tax  laws  which  allow  exemptions  for  minor  children. 

B.  THE   OCCUPATION   TAX. 

The  Occupation  Tax  will  hit  the  industries,  and  encourage  the  over- 
crowding of  factories  down  to  the  very  low  standards  of  the  Labor  Law 
and  the  crowding  of  offices,  as  to  which  there  is  no  legal  limitation  It 
IS  proposed  to  tax  rents  7%,  with  a  deduction  of  $20  tax  in  every  case 
m  order  to  lighten  the  burden  on  the  small  man"~the  majority  state 
A  newsdealer  in  Harlem  pays  $1,500  for  a  little  5  x  20  store  The 
proposed  tax  on  his  pernicious  industry  would  be  $105  minus  $20,  or 
^5  net.  This  is  almost  ten  per  cent,  of  his  income  of  $900  a  year  The 
majority  can  find  no  excuse  for  using  the  taxing  power  of  the  State  for 
social  purposes,  but  they  do  not  hesitate  to  recommend  the  use  of  the 
taxing  power  for  anti-social  purposes;  to  produce  room  overcrowding 
among  the  middle  classes,  to  crowd  workers  in  factories  and  offices  to 
mcrease  rents,  to  drive  people  into  poorer  quarters,  and  to  mulct  the 
workers  generally—for  the  benefit  of  land  owners. 

C.    THE    SALARIES    TAX. 
The  proposed  Salaries  Tax  is  a  frank  admission  that  the  high  cosi 
of  living  in  New  York  City,  and,  particularly,  high  rents  and  heavy  taxes 
on  homes,  are  driving  many  men  with  small  salaries  out  of  the  city,  and 

92 


thereby  reducing  the  taxable  base  of  the  city.  The  majority's  recom- 
mendation is  tantamount  to  the  time-honored  custom  of  cutting  off  one's 
nose  to  spite  one's  face. 

It  would  seem  that  the  real  estate  members  of  the  majority,  on  the 
ground  of  self-interest  alone,  should  have  repudiated  this  economic  mis- 
take. A  man  with  a  salary  of  $3,000,  a  wife  and  three  children,  who 
comes  to  the  city  will  increase  the  assessed  value  of  land  by  at  least 
$2,000,  the  assessed  value  of  buildings  by  at  least  $4,000,  and  the  taxable 
value  of  buildings  by  at  least  $6,000.  The  net  ground  rent  on  $2,000  col- 
lected by  the  land  owner  would  be  about  $100;  while  with  a  tax  rate  of 
2%  this  family  living  in  New  York  would  add  $120  directly  to  the  income 
of  the  city.  Instead  of  encouraging  such  a  family  to  come  here  by 
reducing  their  rent  or  the  local  taxes  on  their  home,  the  majority  pro- 
pose to  "get  even"  by  imposing  a  paltry  $10  tax  on  his  salary.  Obviously, 
if  this  man's  family  lived  here  they  would  spend  most  of  their  $3,000  here. 

FREDERIC  C.  LEUBUSCHER, 
FREDERIC  C.  HOWE. 

ABILITY   TAX. 

Dissenting  Memorandum  By  Mr.  Wilcox. 

When  the  Abilities  Tax  was  before  the  Committee,  first  as  an  emerg- 
ency measure  last  winter,  and  again  recently  as  an  alternative  to  a  State 
income  tax  as  a  permanent  source  of  additional  revenue,  I  reluctantly 
voted  for  it,  with  the  reservation  that  upon  further  reflection  I  might 
change  my  mind  before  the  filing  of  the  Committee's  final  report.  While 
I  prefer  the  Abilities  Tax  to  a  State  income  tax  for  the  reasons  given  in 
my  dissenting  memorandum  on  the  income  tax,  I  am  unwilling  to  recom- 
mend it  at  the  present  time  for  the  reasons  given  by  Mr.  Leubuscher  in 
his  dissenting  memorandum  and  also  for  the  following  reasons: 

(i).  The  majority  states  as  if  it  were  indisputable  that  real  estate 
is  already  carrying  more  than  its  share  of  the  tax  burden  and  must  in 
any  event  be  relieved  of  the  additional  taxes  required  to  meet  the  emerg- 
ency of  the  next  few  years.  It  seems  to  be  forgotten  that  the  best  meas- 
ure of  the  economic  advantages  of  city  life  is  the  annual  site  value  of 
the  land  upon  which  the  city  is  built.  The  expenses  of  city  government 
are,  for  the  most  part,  made  necessary  by  the  disadvantages  of  city  life. 
Certain  of  these  disadvantages  must  be  overcome;  others  can  be  accepted 
permanently,  or  for  a  time.  Cities  have  often  neglected  to  pay  for  the 
removal  of  certain  disadvantages  on  the  theory  that  they  could  be  perma- 
nently endured,  only  to  learn  later  that  the  judgments  of  civilization  have 
been  piling  up  against  them  for  their  neglect  and  must  be  paid.  This 
refers  primarily  to  matters  pertaining  to  children  and  home  life,  such  as 
sanitation,  breathing  spaces,  play  and  education.  I  believe  that  the  cost 
of  removing  the  disadvantages  of  city  life  normally  falls  upon  site  values, 

93 


t  I 


k 


m  which  primarily  the  advantages  of  city  life  are  reflected  I  do  not 
believe  that  land  should  be  relieved  of  the  payments  made  necessary  by 
past  neglect  even  though  the  assumption  of  these  paymentrmaTrLh 

of  td\\teT  T  '  '  '"'T  '"  ""^^^'  '"^  '  ^^-^^-'^^^  -Nation 
o  sites  In  New  V  iT  ' '  "'^f'"^'  ''^'  ''^  ^^'"^^  ^"'^"^^  ^^"^^^  value 
th.  !  f  ^'^  ''  '"^'^'"'  '^  P^y  ^"  *^^  P^^sent  expenses  of 

the  city  government  and  to  provide  for  the  large  increases  which 
pubhc  welfare  and  good  business  policy  demand.  With  all  or  a  b  ee 
portion  of  the  tax  taken  off  buildings  and  with  special  assessments  and 
t  r\TT  ''"  ^'"^'''^  ''"^^"P^"'  '  ^-  ^^  '^^  -P-ion  that  it  will 

incre"  ^^  "'""''  "'  '''  '''^  ^°  ^"^^  ^^^  ^^  ''ate  on  land  to 

inc  ease  as  far  as  may  be  necessary  to  meet  the  legitimate  expenses 

1 1  nf  "ll^T-i"'"'"'-.  ^'^'^  ^'^  ^^"  ''''  ^"  ^-^  h-  reached  the 
hmit  of  endurabihty,  it  is  a  sign  that  the  city  has  reached  or  is  closely 

approaching  the  economic  limit  of  its  growth.    This  time  can  be  post 

fZ.  u\  T'T  "  ^"''''''''^  ^"^  ^^''^""'y  '''  governmental  expendi- 
ures,  but  If  It  IS  postponed  by  the  neglect  of  necessary  municipal  func- 
tions or  by  the  device  of  new  taxes  of  uncertain  incidence  and  the  city  is 
encouraged  to  grow  beyond  its  normal  limit,  the  penalty  will  have  to  be 
paid  later  on  in  economic  and  social  poverty  and  distress. 

It  is  unfortunate,  in  some  respects,  that  our  real  estate  taxes  are 
levied  on  the  basis  of  the  capital  selling  value  of  the  property  with 
the  taxes  discounted  in  the  price.  Of  course,  taxes  on  real  estate  do 
not  diminish  its  use  value  or  gross  rental.  But  the  tax  being  levied 
on  the  selling  value,  the  higher  the  tax  rate  the  lower  will  be  the 
selling  value  and,  presumably,  the  assessed  value.  An  increase  in  the 
tax  rate  should  be  followed  by  a  decrease  in  the  taxable  base.  But  it  is 
clear  on  the  one  hand  that  the  decrease  in  the  base  will  never  be  suffi- 
cient to  offset  the  additional  revenue  resulting  from  a  higher  tax  rate 
and,  on  the  other  hand,  that  no  matter  how  high  the  tax  rate  may  go' 
It  will  never  take  all  of  the  annual  rental  value  of  the  property.  This 
can  be  illustrated  by  the  following  simple  formulae : 


Formula  No.  i: 
Selling  value  (assessed  valuation)  =- 


Annual  Use  Value 


Money  rate  +  Tax  Rate. 
Formula  No.  2: 

Tax  revenue  =  Selling  Value  X  Tax  Rate. 
If  we  assume  that  a  given  piece  of  real  estate  has  an  annual  use 
value  of  $1,000,  over  and  above  operating  expenses  and  depreciation, 
and  that  money  is  worth  five  per  cent.,  then  if  there  is  (a)  no  tax,  the 
formula  will  be  this: 

H 


$1,000 
{3l)  Selling  value  (assessed  valuation)  = =  $20,000. 

.05 
If  the  tax  rate  is  (b)  2%,  (c)  5%,  (d)  10%,  (e)  95%,  or  (f)  195%, 

the  formula  will  be  as  follows: 

$1,000 

(b)  Selling  value  (assessed  valuation)  = =  $14,286. 

.05  +  .02 

$1,000 

(c)  Selling  value  (assessed  valuation)  =  =  $10,000. 


(d)  Selling  value  (assessed  valuation)  = 


.05  +  .05 
$1,000 

.05  +  .10 


=  $6,667. 


$1,000 
(e)  Selling  value  (assessed  valuation)  =  =  $1,000. 


(f)  Selling  value  (assessed  valuation)  = 


.05  +  .95 
$1,000 


=  $500. 


.00  r=  O. 

.02   =   $285. 
.05    =   $500. 

.10  =  $667. 

.95    =   $950. 


.05  +  1.95 

No  matter  how  high  we  go  in  the  tax  rate  there  will  still  be  some 
selling  value,  though  this  value  will  be  less  than  one  year's  use  value 
when  the  tax  rate  gets  above  95%.  But  the  tax  revenue  will  continue 
to  increase  as  the  rate  increases,  though  it  will  always  be  less  than  the 
annual  use  value.  This  is  shown  by  the  following  applications  of 
Formula  No.  2: 

(a)  Tax  revenue  =  $20,000  X 

(b)  Tax  revenue  =  $14,286  X 

(c)  Tax  revenue  =  $10,000  X 

(d)  Tax  revenue  =    $6,667  X 

(e)  Tax  revenue  =     $1,000  X 

(f)  Tax  revenue  =       $500  X  $195  =  $975- 

If  all  land  were  appropriately  improved,  or  if  the  entire  ground 
rent  were  taken  for  public  purposes,  it  would  be  more  logical  to  use 
the  actual  annual  rental  value  of  land  rather  than  the  assumed  selling 
value  as  the  basis  for  taxation.  But,  under  present  conditions,  the  levy 
of  the  tax  on  actual  ground  rentals  would  permit  the  holder  of  vacant 
and  unused  land  to  escape  entirely,  unless  the  increase  in  the  value  of 
his  land  from  year  to  year  were  treated  as  income  or  ground  rent  and 
taxed  accordingly,  as  it  should  be. 

A  further  complication  arises  from  the  fact  that  the  value  of  im- 
provements paid  for  by  special  assessments,  although  it  enters  into  and 
becomes  a  part  of  the  site  value,  nevertheless  does  not  represent  an 

95 


Ul'i 


!t 


unearned  or  community-created  increment.  If  buildings  are  untaxed, 
the  portion  of  the  site  value  represented  by  special  assessments  here- 
tofore or  hereafter  paid  should  also,  in  strict  theory,  be  untaxed.  But 
the  fact  that  many  of  these  increments  of  land  value,  due  to  improve- 
ments other  than  buildings,  are  relatively  imperishable  and  readilv 
merge  virith  site  value  makes  it  somewhat  impracticable  to  class  these 
improvements  with  buildings  for  untaxing  purposes.  It  would  be  prac- 
ticable, however,  to  protect  from  any  increase  in  the  regular  tax  rate 
all  future  improvements,  the  cost  of  which  is  to  be  subtracted  from 
the  increment  before  the  increment  tax  is  levied. 

(2).  The  possible  extension  of  the  special  assessment  principle 
as  a  means  of  securing  additional  revenue  and  relieving  the  tax  rate  is 
referred  to  more  fully  in  my  concurring  memorandum  in  favor  of  the 
increment  tax.  But  the  Committee  as  a  whole  has  brushed  aside  too 
lightly  the  possible  increase  in  revenues  from  miscellaneous  sources. 
For  example,  high-power  and  high-speed  automobiles  eat  up  the  roads 
provided  for  general  use,  increase  the  cost  of  police  protection  and 
subject  pedestrians  and  ordinary  vehicular  traffic  to  expensive  perils. 
It  would  be  quite  proper  to  make  the  new  means  of  locomotion  carry 
the  full  burden  of  its  cost. 

(3).  Moreover,  the  water  department,  with  the  assumption  of  the 
Catskill  development,  will  have  to  sustain  additional  annual  carrying 
charges  of  $7,000,000  or  $8,000,000  without  any  immediate  increase  in 
revenues  and  with  only  about  $1,000,000  saving  in  operating  expenses. 
Meanwhile  the  department  is  getting  more  than  one-half  of  its  total 
revenues  from  the  sale  by  meter  measurements  of  26.5%  of  the  total 
amount  of  water  supplied.  Obviously,  the  water  revenues  of  the  city 
could  be  greatly  increased  by  the  extension  of  the  meter  system,  or 
else  great  savings  could  be  made  through  the  reduction  of  waste  and 
leakage.  It  is  well  known,  however,  that  the  real  estate  interests, 
which  are  insisting  on  the  necessity  of  relief  in  the  matter  of  taxation, 
are  largely  opposed  to  the  introduction  of  water  meters  into  apartment 
houses  and  other  multiple-family  dwellings.  The  meter  system  is 
equitable,  efficient  and  financially  sound.  There  is  no  good  reason 
for  resorting  to  new  forms  of  taxes  for  the  relief  of  real  estate  while  the 
introduction  of  elementary  business  principles  in  the  sale  of  water  is 
strenuously  opposed  by  the  realty  interests. 

(4).  The  citizens  of  New  York  do  not  seem  fully  to  realize  that 
when  the  dual  rapid  transit  system,  now  under  construction,  is  com- 
pleted and  in  operation,  either  the  traveling  public  or  the  taxpayers  will 
have  to  supply  for  local  passenger  transportation  $35,000,000  or  $40,000,- 
000  a  year  in  cash  more  than  they  supply  now.  The  benefits  of  the 
$350,000,000  of  new  investment  devoted  to  transit  will  go  primarily  to 
the  land  owners  of  the  city  or  to  the  traveling  public,  or  to  both.  It 
follows  either  that  land  should  be  made  to  bear  the  cost  or  that  the 


transit  system  should  be  made  self-sustaining.     Certainly  there  is  no 
ground  for  imposing  a  Habitation  Tax  or  a  Salaries  Tax  to  help  sustain 

the  subways.  -  u^  u    a 

(5).  Other  special  sources  of  miscellaneous  mcome  might  be  ae- 
veloped  on  the  basis  of  special  privileges  enjoyed  or  special  govern- 
mental expenses  caused.  Until  a  comprehensive  effort  has  been  made 
to  meet  the  emergency  along  the  lines  above  indicated,  I  am  not  pre- 
pared to  approve  either  a  State  income  tax  or  a  local  Abilities  Tax  as 
a  means  of  raising  additional  revenue  for  the  City  of  New  York. 
^  DELOS  F.  WILCOX. 


ABILITY    TAX. 
Dissenting  Memorandum  By  Messrs.  MuUan,  Shipley  and  Woodward. 

We  dissent  from  the  recommendation  of  the  proposed  Habitation 
and  Occupation  Tax  for  the  following  reasons: 

1.  It  is  wholly  improbable  that  the  people  of  the  State  would  at 
this  time  approve  of  any  such  novel  and  untried  device.  And  if  the 
people  of  the  State  as  a  whole  do  not  favor  it,  neither  the  present  legis- 
lature nor  any  legislature  in  the  near  future  can  be  expected  to  enact 
it  into  law,  as  new  ideas  of  any  sort  must  make  their  way  slowly,  if  at 
all,  into  statutory  form,  and  experience  has  shown  this  to  be  particularly 
true  in  respect  of  taxation  measures.  It  is  no  answer  to  say  that  we 
ask  for  it  for  the  City  of  New  York  alone,  for  it  is  quite  unlikely  that 
if  a  legislature  should  disapprove  of  the  principle  of  any  form  of  taxa- 
tion it  would  be  willing  to  create  an  entering  wedge  for  state-wide 
adoption  of  it  by  allowing  it  to  be  used  in  any  part  of  the  State. 

2.  The  tax  is  a  "presumed"  abilities,  or  income  tax.    The  piesump- 
tion  is  based  on  what  in  any  given  case  may  be,  and  in  a  vast  number 
of  cases  will  be,  a  very  false  guide  to  ability,  namely— outward  appear- 
ances, manifested  by  the  occupation  of  a  particular  residence  or  place 
of  business.    A  tenant  takes  a  lease  of  a  residence  or  business  place,  at 
a  time  when,  presumably,  his  circumstances  and  prospects  fully  justify 
him  in  undertaking  such  a  burden.     His  condition  changes,  his  income 
falls,  but  he  is  compelled,  nevertheless,  to  perform  his  lessee  obligations, 
and  thus,  by  continuing  in  occupancy,  to  furnish  an  untrustworthy  cri- 
terion of  his  income.     This  likelihood  of  deception  of  outward  appear- 
ance is  equally  true  of  the  ownership  of  property  of  either  a  residential 
or  business  character,  and  the  degree  of  injustice  to  occupying  owners 
is  probably  greater  even  than  that  to  lessees.     The  possible  answer  to 
this  objection,  viz.,  that  the  owner  may  sell  his  property,  or  the  lessee 
his  lease,  is  unsatisfactory  and  unconvincing.     Sales  at  fair  prices  can- 
not  be  forced,  and  even  at  a  sacrifice  they  can  be  made  only  slowly,  and 
sometimes  not  at  all. 

97 


i 


96 


'  i  ,  . 


I      111 


occupied  b7theo:„e/  .^0,  ??  ''  "'"■^'  '"'  ^^"*^'  ^^^  °^  P-™ses 

must  be,  to  cover  all  case,  hulU  ,  .  '""'*'P''«'-s.  designed,  as  it 
would  be  far  from  it    f  knowledge  that  the  tax  averages  well 

the  basl  o  reZ  yT/sZ^  T'"'''  °"""^  -'"'  "«  *'-<«  - 
In  the  case  of  residentkr*'''^  T^^  "'''''  ''"P'  '°  °^*^'"  °"  ^  •«««• 
be  particularl/nag:;;;    '''"'''  *''  '"^"^^"^  *°  ""^"^  ^-""^  -°"'d 

4-  As  to  whether  the  incidence  nf  -»  Wok;4.  4.-  -i- 
of  leased  premises,  would  fal  on  the  andford  o  '°"  ^r*  '"  ''^  "^"^ 
impossible  accurately  to  state  Tn  nJ  ?  7^  °"  *''^  *'"^"*'  **  '« 
that  in  some  cases  it  LlTi  n  ^T  °^  ^^'''  '*  '^  P'°^^^^y  t™« 
landlord.  The  reSul  is Ti  '  .T  '  *'"'"*  ""'^  '"  '''''"'  °"  ^he 
the  landlord    itTould   IT  i"  elcT  'T'    "  ''^  *^^  ^''°"'<^  ^^"  ^ 

income,  .„d  hav.  to  pay  o„Ti„.^  TT    *  '"""""'  "'  "'*  ""= 

~p.«.  f.com..  wiZTh:;, ,  te  r'bi".  J". """  rr"""  ""■ 

eleventh  hour  modification   ^LT  *^.     ""''  """8'"  '»  *'! 

iion  in  the  Committee       Im^f  "*  °°'  T""'  ""  '""■'"•  «'  •!»»- 

the  original  .^      '  IX  fi  °  "^l  ^S  '"'  '*"■"  "■*"  "™^"»»- 
modification  carries  „ith  iJan  ?!£     f       ■''  ""«"«  »'  »«!■  > 

wonid  ™,.  ini«s,ice"';„"the".Z  dUe"'rd",;S:  '^L*;'":-'" 

man  too  heavily  taxed  because  of  f.ic  modification  a 

o*t  to  tednce  L  hni^nrLtltd  'p^/rr J,  S  "^LT 
such  persons  a.  ate  not  U«ed  heavi,,  eno.gVbeeaui  ^uraScS; 

98 


ill 


of  the  multiplying  system,  are  allowed  to  escape  payment  on  what  in 
many  cases  would  be  a  large  part  of  their  real  income.  The  effect  is 
not  only  to  produce  inequality  of  taxation,  but,  under  the  guise  of  a 
Habitation  or  Occupation  Tax,  to  force  on  some,  and  not  on  all,  a  real 
income  tax.  In  the  third  place,  one  of  the  supposed  advantages  of  a 
Habitation  or  Occupation  Tax  claimed  by  the  advocates  of  that  pro- 
posal was  that  it  was  as  indisputably  valid  as  to  non-residents  as  it  was 
in  the  case  of  residents.  They  certainly  can  make  no  such  claim  in  so 
far  as  their  plan  forces  a  tax  on  real  instead  of  assumed  income,  and 
becomes,  in  consequence,  a  direct  income  measure.  We  purposely  re- 
frain from  detailed  discussion  of  what  we  conceive  to  be  the  several 
legal  obstacles  erected  by  the  proposed  modification,  partly  because  of 
lack  of  time  and  partly  because  we  find  it  difficult  to  believe  that  the 
proposal  in  question,  either  with  or  without  the  modification,  has  any 
chance  of  approval  on  its  merits  as  a  tax  measure,  regardless  of  purely 

law  defects. 

GEO.  V.  MULLAN, 

FREDERIC  B.  SHIPLEY, 

COLLIN  H.  WOODWARD. 


I 


ABILITY   TAX. 

Dissenting  Memorandum  By  Mr.  Pink. 

I  dissent  from  the  recommendation  of  an  Ability  Tax. 

LOUIS  HEATON  PINK. 


! 


99 


4.    THE  INCREMENT  TAX  ON  LAND  VALUES. 

Majority  Report. 

tinn  !n  T  r'^i^^'l  °^  '^''  '"P°'*  y°"'  Committee  have  called  atten- 

Z  h  Ta         u  ""^  ^"""'^  *°  '^^'y  '""''°"«  «f  dollars  would  before 

long  be  needed  m  the  shape  of  additional  revenue.  We  have  pointed 
out  that  a  very  substantial  part  of  this  increase  can  be  derived  from 
either  a  Direct  Income  Tax  or  a  Presumptive  Income  or  Ability  Tax. 
There  still  remains,  however,  a  material  sum  that  must  in  all  probability 

LxIZ  nfT     .     'f  ''°"'  Committee  to  take  up  again  the  question  of 
axation  of  land.     Some  members  of  your  Committee  are  in  favor  of 
this,  quite  irrespective  of  the  other  recommendations 

While  it  is  true,  as  your  Committee  have  already  pointed  out,  that 
of  all  possible  times  this  is  the  most  inopportune  to  increase  the  burden 
on  land,  because  of  the  great  depression  of  real  estate,  and  while  both 
in  view  of  the  particular  conditions  of  New  York  and  of  the  general 
principles  involved,  your  Committee  have  previously  stated  that  they 
do  not  believe  m  the  exemption  of  buildings  from  taxation  or  in  the 
imposition  of  any  heavier  burden  upon  existing  land  values,  it  remains 
none  the  less  true  that  we  should  regard  with  open  minds  the  general 
question  of  the  advisability  of  raising  in  the  future  an  additional  rev- 
enue  from  land  values. 

.h  ^^"f^%P^^"t'  ^^  ^^'^^  with  the  majority  of  modern  economists 
hat  land  values  afford  an  especially  promising  and  suitable  basis  for 
ocal  taxation  We  do  not  indeed  believe  that  land  values  should  form 
the  exclusive  basis  of  taxation.  We  hold,  however,  that  under  certain 
conditions  to  be  described  in  a  moment,  a  larger  revenue  may  in  the 
fu  ure  be  derived  from  this  source  than  is  the  case  at  present.  Land 
values  in  a  growing  city  tend  to  increase,  notwithstanding  periods  of 
temporary  regression.  Land  owners,  moreover,  as  a  general  class,  are 
in  a  position  to  amortise  a  burden  of  taxation,  and  if  care  be  taken  not 
to  decrease  the  capital  value  of  the  investment  in  land  in  the  hands  of 
present  owners,  since  future  purchasers  may  be  depended  upon  to  buy 
themselves  free  of  any  increasing  tax  burden  that  has  accrued  in  the 
mterval,  it  is  possible  to  secure  additional  revenues  from  land  without 
injustice. 

How  can  this  be  accomplished?  In  the  first  part  of  the  report 
your  Committee  have  indicated  their  reasons  as  to  why  they  disapprove 
of  the  exemption  of  buildings  from  taxation.  It  will  be  remembered 
that  the  chief  objection  was  stated  to  be  that  land,  especially  in  the 
present  depressed  condition,  is  already  bearing  more  than  its  due  share 

100 


of  taxation;  and  that,  in  the  opinion  of  your  Committee,  it  would  be 
inequitable  to  frame  any  scheme  of  taxation  which  would  reduce  the 
capital  value  of  land  in  the  hands  of  existing  owners.  Your  Committee, 
however,  have  considered  whether  some  scheme  of  land  taxation  would 
not  be  possible  without  exposing  it  to  the  objection  mentioned  above. 

In  the  opinion  of  your  Committe,  it  is  still  possible  to  accomplish 
the  desired  result  by  imposing  a  tax  on  the  future  increase  or  increment 
of  land  values.     Your  Committee  recommend  that  there  be  levied  a 
flat  one  per  cent,  on  all  future  increases  of  land  values,   making  the 
basis  from  which  the  future  increment  is  to  be  estimated   the  value, 
with  the  exception  noted  below,  at  the  time  when  the  law  is  enacted. 
Owing,   however,   to   the   present   depression   in   real   estate,   the   basis 
from  which   the  increase  is  to  be  calculated   should  be  not  the   year 
1916,  but  any  year  between   1910  and   1914  which  marks  the  highest 
assessed   valuation,   provided   the   property   has   not   been   sold   in   the 
meantime.    If,  for  instance,  a  plot  of  land  in  the  year  1912  was  assessed 
for  $10,000  and  in  the  year  1916  at  only  $8,000,  then  if  its  value  in  191 7 
or  thereafter  should  rise,  it  would  not  be  subject  to  the  increment  tax 
until  the  value  would  again  rise  to  over  $10,000.    Moreover,  in  assessing 
the  Increment  Tax  allowance  should  be  made  for  any  sums  paid  for 
special  assessments  which  would  increase  the  value  of  the  land. 

In    considering   the    application    of   the    Increment    Tax,    attention 
should  be  called  to  a  distinction  which  is  of  considerable  practical  im- 
portance.    There  is  no  doubt  in  our  minds  that  if  the  Increment  Tax 
be  accepted  it  should  be  immediately  adopted  in  the  case  of  all  vacant 
land,  as  well  as  in  the  case  of  underimproved  land.     Where,  however, 
there  are  existing  normal  improvements  on  particular  plots  of  land,  it 
is  susceptible  of  proof  that  unless  great  care  be  observed  considerable 
injustice  may  result.     As  a  matter  of  strict   equity,  no  increment  on 
land  values  ought  to  be  figured  until  the  value  of  an  existing  normal 
improvement,  properly  amortized,  merges  into  the   value  of  the  land. 
There  are,  for  instance,  many  examples  in  the  City  of  New  York  where, 
at  a  given  time,  entirely  proper  improvements,   as,   for  instance,   six- 
story  tenements   or  apartments,   were   put  upon   the   land.     So   rapid, 
however,  is  the  change  in  conditions  in  New  York  City  that  after  the 
lapse  of  ten  or  fifteen  years  land  values  in  particular  sections  may  in- 
crease so  much  as  to  make  it  profitable  to  cover  an  adjoining  vacant  or 
underimproved  lot  with  a  twelve-story  structure  or  even  a  skyscraper. 
This   will,  of  course,  relatively  depreciate   the   value  of   the   six-story 
structure  which  was  an  entirely  normal  improvement  and  which  is  as 
yet  by  no  means  worked  out  or  obsolescent.     The  owner  of  the  six- 
story  structure  finds  that  the  value  of  his  land  is  normally  increased 
considerably,  but  the  total  value  of  his  property  is  now  less  than  before, 
because  the  structure  is  worth  practically  nothing  and  his  total  income 
is  very  much  less  than  before  because  his  six-story  structure  will  be  more 

101 


V  • 

■v. 


iiijtmi  it 


I         ii 


and  more  deserted  for  the  better  accommodations  in  the  neighborhood. 
Although  the  selling  value  of  his  structure  has  virtually  disappeared, 
the  assessed  valuation  on  the  tax  books  has  decreased  little,  if  at  all. 
He  IS  therefore,  paying  actually  more  taxes  and  is  getting  less  revenue 
than  before,  that  is,  he  is  hit  at  both  ends  and  has  really  suffered  a  detri- 
ment. If.  now.  m  addition  he  has  to  pay  an  Increment  Tax  because  of 
the  mcreased  valve  of  the  land,  he  will  suffer  a  third  time 

,hift«  .!'^  'm''^''^P','  "°  "*^  '"  '^^  ^"'■'^  ^•'^'"^  there  are  such  rapid 
shifts  as  m  New  York.  It  is  not  unusual  for  the  same  plot  of  land  to 
be  successively  covered  by  three  or  four  different  kind.s  of  structures 

nlT:.^'"r'T     The  situation  is  far  more  common  thanTordl 
eouitah     r  ""Z'  C^*"-'"-,  therefore,  believe  that  a   perfectly 

equ  table  Increment  Tax  could  be  applied  in  such  cases  only  where  the 
value  of  an  or.gmally  normal  improvement,  when  properl/alort led 
merges  mto,  or  is  overtaken  by,  the  value  of  the  land.     It  fs  onlv  from 

tax  l^e°"\t°:otld  ?^  T'T'  ■"  '^"^  ^^■"-  should  Ucons'dere" 
taxable.     It  would  be  relatively  simple,  moreover,  for  the  tax  author! 

ties  to  provide  a  proper  amortization  rate  for  each  kind  of  ^^ilding  as 
they  now  provide  for  the  factors  of  assessment  ^ 

systeiTi^rsLt  rmSorup^rhSt  of\: -r  ^°"'- 

apply.     For,  ,n  that  case,  it  is  not  likely  that  a  twelve-storv  Z^rLZl 

ZrfZTZ'^Tf  'V''^'^'  --^^-'^'^  adjoininra lito  r  r 
ture  until  the  whole  character  of  the  neighborhood  had  .so  comnletelv 

changed  as  to  render  existing  improvements  sub-normal  husTrinH '^ 
about  an  alteration  in  the  character  of  the  zone  itself  if  ».  1^^^ 
the  above  rather  complicated  considerations  are  tot  av^^id Ttlsl' 

tLT'u  f  ^'"  ''"^'"^  '''''  '""^  introduction  of  a  land  it  emeit 
Tax  should  be  attended  by  the  adoption  of  a  zoning  system 

the  t  T  .'""^  !''  '""'"'^"*  T^^'  •*  •""«*  be  borne  in  mind  that 
the  two  objections  that  might  be  advanced  against  it  are  reaHy  desti  ut. 
o^^^foundation.  It  might  be  said,  in  the  first'place,  that  th"  Ld  w 
men  Tax  is  an  entering  wedge  of  the  single  tax.    This  is  an  error     Th. 

SU^esThuTdt"^-  ?  "^"r  '''-'  -  ^"  -^«'"  ^  «i^^n^ 
FnHvJr   ^  ff  diminishing  or  destroying  the  capital  value  of  land 

Entirely  different,  in  our  opinion,  is  the  Increment  Tax,  which  af^^ct, 

taxes  whth  .  ',  ,  '^"  ?^  '"P"*"'  ^^'"^  "^  '^"d-  I""ement  value 
taxes,  which  deal  only  with  the  future,  should  not  be  confused  wiJh 
taxes  on  existing  land  values.  ^"niusea  with 

r.JV^^  TZ^-  -P'^"'  '*  '"'S^'  ^^  "''i^^ted  to  that  the  Increment 
Tax  imposed  additional  burdens  upon  real  estate  as  a  whole      This 
again  is,  in  our  opinion,  erroneous.     The   Increment  Tax  i^'  reali  y 
levies  a  tax  where  taxation  ought  to  rest,  namely,  upon  those  best  able 

302 


to  pay.     Is  it  not  true  that  when  a  land  owner  secures  an  appreciable 
increase  in  the  value  of  his  land,  either  through  the  action  of  the  gov- 
ernment or  through  the  general  growth  of  the  community,  he  is  really 
making  a  profit,  a  part  of  which  might  equitably  go  to  the  government? 
Apart  from  this  general  consideration,  it  may  be  pointed  out  that 
the  increment  tax  must  be  considered  as  primarily  a  burden  on  the 
particular  owners  who  are  especially  benefited.    The  completion  of  the 
vast  scheme  of  rapid  transit,  costing  about  $350,000,000,  and  for  which 
the  taxpayers  have,  in  large  measure,  to  pay,  will  substantially  increase 
land  values  in  some  sections  of  the  city  and,  perhaps,  in  all  the  bor- 
oughs.    The  imposition  of  an  Increment  Tax  diminishes  the  burden  on 
the  land  owners  who  may  suffer  a  decrement  or  whose  property  remains 
stationary;  for,  if  there  were  no  Increment  Tax,  the  ordinary  tax  rate 
on  real  estate  would  be  raised  throughout  the  city.    The  burden  which 
in  this  way  is  removed  from  the  land  owners  who  do  not  benefit  is  thus 
borne  by  those  land  owners  who  are  best  able  to  pay,  namely,  those 
whose  land   enjoys  an  increase  in  value.     The  Increment  Tax  really 
amounts  to  a  supplementary  income  tax  or  Ability  Tax. 

The  revenue  to  be  derived  from  this  Increment  Tax  would,  indeed, 
not  be  great  at  first,  but  it  would  substantially  increase,  from  year  to 
year.  In  proportion  as  there  will  probably  come  within  the  next  few 
years  a  restoration  of  prosperity  in  the  real  estate  situation,  and  even 
on  the  assumption  that  the  average  increase  of  land  values  during  the 
next  five  or  ten  years  will  be  only  $75,000,000  or  $100,000,00  a  year. 
the  land  Increment  Tax  will,  within  a  very  few  years,  yield  a  consider- 
able revenue  to  the  city,  and  not  the  least  claim  to  our  consideration  is 
the  fact  that  it  forms  a  revenue  which  will  be  derived  without  interfer- 
ing  in  any  degree  with  the  existing  property  rights  of  land  owners  in 

the  City  of  New  York. 

EDWIN  R.  A.  SELIGMAN. 

FRANK  HARVEY  FIELD, 

JOSEPH  N.  FRANCOLINI, 

HAMILTON  HOLT, 

JEREMIAH  W.  JENKS, 

WALTER  LINDNER, 

LOUIS  HEATON  PINK, 

OSCAR  R.  SEITZ, 

FREDERIC  B.  SHIPLEY, 

F.  S.  TOMLIN. 


^ 


INCREMENT   TAX. 

Concurring  Memorandum  By  Messrs.  Marling  and  White. 

The  undersigned,  in  considering  the  whole  question  of  new  sources  of 
revenue,  cannot  withhold  their  opinion  that  it  is  equally  important  that 


103 


every  economy  that  can  be  made  in  the  administration  of  the  City  should 
be  practiced,  but  that  if  there  are  no  other  economies  possible  than  those 
already  realized,  and  if  it  shall  still  be  necessary  to  secure  additional  rev- 
enue, then  we  reluctantly  regard  an  Increment  Tax  on  land  values  on 
the  hnes  submitted  as  under  those  circumstances  being  desirable  for  a 
limited  period,  and  not  to  be  adopted  as  a  permanent  means  of  revenue. 

ALFRED  E.  MARLING, 
CHARLES  T.  WHITE. 


INCREMENT  TAX. 
Concurring  Memorandum  By  Mr.  Simon. 

.1,  .^  ^"^n/^^o"-  of  the  suggested  Increment  Tax,  provided,  however, 
that  m  addition  to  the  other  suggestions  contained  in  the  report,  provi- 
sion ,s  made  whereby  no  tax  is  charged  on  any  increment  which  may  be 
the  result  of  improvements  for  which  a  special  assessment  has  been 
levied. 

ROBERT  E.  SIMON. 

INCREMENT   TAX. 
Concurring  Memorandum  By  Mr.  Binkerd. 

rr^JT^'"^^  r  '/''^"^  additional  local  revenue  by  an  unearned  lucre, 
ment  Tax  on  land. 

ROBERT  S.  BINKERD. 

INCREMENT   TAX. 
Concurring  Memorandum  By  Mr.  Wilcox. 

I  concur  in  the  majority  recommendation  of  a  tax  on  the  increm^^nf 
of  land  values,  but  diss.nt  in  regard  to  some  of  the  detaiband,  in  Turner 
ous  respects,  as  to  the  statement  of  reasons  for  the  tax.    To  my  mtj 
he  Increment  Tax  is  just  because  it  aims  to  take  a  portion  of  tTe  futur; 
increase  m  land  values  created  by  the  growth  and  gene  al  prospei^^y  o 
the  commumty  and  by  public  expenditures  for  improvements  not'pid'^fo 
by  special  assessments.    If  the  Increment  Tax  is  ever  to  be  adopted  in 
New  York,  the  present  is  a  most  appropriate  time  for  introducLg  i  tT^^ 
city  s  enormous  expenditures  for  rapid  transit  improvements  are  in  lar^! 
measure   responsible  for  the  present  demand  for  a  great  increase T 
revenues.    Many  citizens  believe  that  rapid  transit  exte^ions,  espe  L  y 
in  the  comparatively  undeveloped  sections,  should  have  been  paid  for  by 
special  assessments.    That  has  not  been  done,  and  now  it  is  possible  to 

104 


accomplish  the  same  result  in  part  by  the  Increment  Tax.  From  the 
increment  is  to  be  deducted  the  amount  of  intervening  payments  on 
account  of  special  assessments.    The  two  plans  dovetail  into  each  other 

very  well. 

The  Committee  was  unable  to  complete  its  study  of  possible  exten- 
sions of  the  special  assessment  plan,  but  the  introduction  of  the  Incre- 
ment Tax  will  not  in  any  way  interfere  with  the  larger  use  of  special 
assessments  in  the  future.    The  Increment  Tax,  if  introduced  now,  will 
undoubtedly  bring  a  large  revenue  by  the  time  the  full  effect  of  rapid 
transit  development  on  land  values  is  realized.    In  the  meantime,  several 
classes  of  improvements,  heretofore  paid  for  out  of  bond  issues,  most 
of  which  are  hereafter  to  be  included  in  the  annual  tax  levy  under  the 
pay-as-you-go  policy,  might,  with  considerable  propriety,  be  paid  for  by 
special   assessments.     Many  of  these   are   improvements  that   will  be 
required  in  unusual  number  during  the  period  of  the  shifting  of  popula- 
tion now  under  way.     I  refer  to  such  things  as  the  purchase  of  school 
and  library  sites,  the  construction  of  school  buildings  and  fire  stations, 
the  purchase  and  improvement  of  parks  and  playgrounds,  the  extension 
of  water  mains  and  the  repaving  of  streets.    For  these  purposes  the  city 
spends  about  $15,000,000  per  annum.     They  all  benefit  the  particular 
localities  where  the  improvements  are  made. 

It  would  be  particularly  appropriate  that  repaving  should  be  paid 
for  by  special  assessment  wherever  original  paving  is  paid  for  by  this 
plan.     The  argument  sometimes  advanced  to  the  effect  that  repaving 
should  be  a  general  charge  because  the  special  benefit  to  abutting  land 
is  exhausted  with  the  original  improvement  seems  to  me  fallacious.  When 
a  property  owner  pays  for  a  pavement,  and  secures  a  corresponding  bene- 
fit, he  buys  the  benefit  for  the  life  of  the  improvement  and  no  longer. 
If  it  be  urged  that  he  does  not  himself  wear  the  improvement  out,  it  may 
be  answered  that  he  gets  the  benefit  of  it  chiefly  because  it  is  used  by 
the  general  public.     He  should  be  required  to  replace  the  improvment 
when  it  is  worn  out  just  the  same  as  he  has  to  replace  his  buildings  when 
they  become  useless.    Anything  that  a  man  buys  or  pays  for,  he  is  bound 
to  replace  if  he  wishes  to  retain  its  value.    If  the  pavement  on  a  certain 
street  were  allowed  to  wear  out  and  disappear,  abutting  lands  would 
suffer.    For  this  reason  special  assessments  paid  for  repaving  ought  not 
to  be  deducted  from  the  increment  in  determining  the  amount  against 
which  the  Increment  Tax  shall  be  levied. 

I  am  of  the  opinion  that  the  Increment  Tax  should  not  be  regarded 
as  supplementary  to  some  large  new  plan  for  securing  additional  rev- 
enue, but  that  it  should  be  put  forward  in  connection  with  a  larger  use 
of  special  assessments,  as  a  just  and  permanent  means  of  securing  rev- 
enue, the  introduction  of  which  at  the  present  time  is  particularly 
expedient. 

DELOS  F.  WILCOX. 

105 


i 


h 


I  I 
I 


fir 


I  ■ 


i 


ill. 


i 


II 


INCREMENT    TAX. 
Dissenting  Memorandun.  By  Messrs.  Purdy  and  Others        ' 
value?  ''"^"^  '""  *'^  recoxnmendation  of  an  Incren^ent  Tax  on  land 

LAWSON  PURDY 
ARDOLPH  L.  KLINE, 
DAVID  RUMSEY, 
COLLIN  H.  WOODWARD. 

INCREMENT   TAX. 

Dissenting  Memorandum  By  Messrs   Mill.-   «  n 

'  "''^s'^s-  Miller,  Halleran  and  Mullan. 

We  dissent  from  the  report  favoring  the  Increment  Tax 

subie°:^?:rrsro"te:t^r  ""^^^  -^°  r;  J^stigated  the 
edge  on  the  subject,Tecognize  thetn  ""7  "'°  '''"'^^  ^"^  '^"°-l- 

ing  expenses  for  the  govern"  en    on        f    ^"^'"'^  *°  '"'^  ''''  ■""-^- 
there  is  a  necessity  noj  „"    oX  „ot  toTn  '^^  '^^^  ^^"^*^  »''^* 

but  to  find  other  sources  o  re'en"  30  Z7"V  '^""'^  °"  '''''  ''''''• 
this  committee  proDose,  to  T,T    .  u       ''"^'  '^^'  "*^*«'  ^""l  X^t 

bur^n  on  re.  TX^^  tlVE^Vritrert^Tax^  '^^^^^^  ^^^ 

landLletToTtaId:t;rLrstrd"^^^^'^  ''--  *^  —  "^ 
profit  over  and  above  the  normal  r^^-^'^^'''  "'^  '"  '"*'''  ""*  °^  '"''' 
is  no  other  form  of  weaUhTn  .h  '^''"'^  °^""  P^^''-    There 

^^^  lorm        wealth  m  the  community  which  is  treated  in  this 

on  Jt  "i  J:Tn"aVvtcTof ;'  t  '^'°^  ^"  '^"^  ^"'^  ^^^^  *-« 
and  takes  his  cha^esla  profit  t?  't'  ^k  'T"^'  *'^  government. 

rncrea:rrv';.r  ^  :r'^*  ^"  '"'^^^"'^"^  *^^  '^  -^--^ ""-  s 

where  thJe  is  !n-  *''■^  "^T"'^  ^^  *-  the  capital  value,  so  that 
Where  there  ,s  an  mcrease  in  the  value  of  the  property  whether  bv  ad 

m  rio  Jef  tSr""^"^.  \''  -P-emen?s  o'r  by'  unearned  tr-' 
ment  so  called  the  mcrease  m  the  value  is  taxed.  We  pay  an  Increment 
Tax  now.  Why  pay  it  twice  ?  It  is  to  be  seen,  theref^  that  ^em, 
ttntCe"  ^"'*  '^""'■'""^  '"  "^"^^  '^°""*"-  may'not  fit'coS- 

106 


WHO  WILL  REFUND  THE  DECREMENT? 
It  is  claimed  that  the  Increment  Tax  is  just  because  it  is  caused 
bv  the  increase  in  population  and  the  resulting  increase  in  demand,  and 
is  not  earned  by  the  owner.  If  the  population  moves  away,  what  re- 
dress is  there  for  the  owner  who  has  expended  his  money  on  buildings 
and  improvements,  relying  on  the  permanent  stay  of  the  population? 
If  there  is  a  tax  on  the  unearned  increment  where  there  is  an  mcrease  in 
value,  should  there  not  be  a  return  for  the  undeserved  detriment  where 

there  is  a  decrease? 

It  does  not  seem  to  impress  those  who  favor  the  Increment  Tax 
that  the  more  property  is  taxed  the  less  capital  will  be  invested  m  it. 
thereby  retarding  the  development  of  real  estate.  The  fact  seems  to  be 
forgotten  also  that  the  Increment  Tax  will  bear  more  heavily  upon 
property  in  the  suburbs  than  in  the  center  of  the  city,  because  in  the 
suburbs  the  percentage  of  increase,  when  there  is  an  increase  is  higher 
than  in  the  center.  The  injustice  of  taxing  the  increment  in  the  suburbs 
lies  in  the  fact  that  capital  has  been  invested  in  the  suburbs  sometimes 
many  years  before  there  is  an  increment.  In  the  meantime  taxes,  assess- 
ments and  interest  have  accumulated.  These  are  to  be  repaid  only 
when  the  increment  begins  to  grow,  but  at  this  point  the  State  steps 
in  and  takes  what  the  investor  should  have  had  to  repay  him  for  his 
foresight  and  frugality.  The  inevitable  tendency  of  the  tax  will  be  to 
retard  the  development  of  the  suburbs  and  to  increase  congestion  in 

the  center. 

NOT    COMPELLED   TO~  INVEST. 

Capital  is  not  compelled  to  invest  in  real  estate.  It  will  go  there 
only  when  it  is  assured  of  a  profit.  The  ultimate  benefit  to  the  com- 
munity requires  that  all  obstacles  to  the  free  flow  of  capital  be  removed. 
Increment  is  the  profit  coming  to  the  prudent  investor  m  real  estate 
and  should  belong  to  him.  This  is  the  only  way  to  encourage  enter- 
prise. If  an  Increment  Tax  is  to  be  imposed  because  the  population 
makes  the  value,  why  not  tax  the  increment  in  goods  manufactured 
in  New  Jersey,  where  there  are  not  enough  people  to  buy  them  and 
transported  to  New  York  where  there  are  people  enough  to  buy  them. 
How  does  real  estate  differ  from  any  other  commodity? 

DETERIORATION    OF   BUILDINGS. 

The  increase  in  land  values  makes  up  for  the  decrease  in  values  of 
buildings  which  become  worn  out  or  out  of  date.  The  hope  of  an  in- 
crease in  the  value  of  the  land  induces  capital  to  invest  in  real  estate. 
The  building,  of  course,  must  decrease  m  value.  If  this  loss  is  not  made 
up  by  increase  in  land  values  it  must  be  paid  by  tenants  in  the  form 
of  higher  rents.  Any  Increment  Tax  on  land  values  must  lessen  the 
compensation  for  the  loss  of  buildings. 

The  Commission  on  New  Sources  of  City  Revenue,  in  its  report 
to  the  Board  of  Estimate  and  Apportionment  on  January  ii,  1913,  says: 

107 


I 


m 


I 


Il   < 


iHiIti 


i 

■ 

!       3 

I     i 

i'           j 

1 1 

paving,  etc.,  such  an  incre  Jn     ^   fe  eTtJ^^^^^^^         ^^^^^  °P--?«. 
invested  by  the  owner,  would  not  be  suStol^r'^w"''  ""'*'' 

^ade  by  the  city  or  by  cithers 'hi  t  o:^:^^^  'TrtrX? 

^  t" :  ^sn:?"'  ^'°"'':*^^  ^^'""  ''^'^'  -  '9ik  to ;; ; 

uuo,  in  1913,  and  the  owner  can  show  that  he  has  exnenHpH  <t.  Z^  • 
pern^anent  in,provements.  either  upon  his  own  inittive  orfn  paytTt  oi 

an  Increment  Tax  on  only  $6,000;  and  thereafter  the  base  valuation  nf 

OWNERS   ENTITLED  TO   INTEREST 
.nrfr  ^"'^  ^"^P^^t^"^  omissions  here  should  be  noted.    First  the  re- 
port does  not  propose  to  allow  the  owner  interest  on  the  cost  of  h!s 
improvements.     In  every  other  investment  of  capital  interest  on  the 
money  ,s  computed  before  a  profit  is  declared.    Sometimes  the  inLes 

ncTetnt  L^bf^^^^^^  ^^^^^^  '^^'  -^  subtract  from  th 

increment  to  be  taxed,  the  manufacturer\s  profit  belonging  to  the  own- 
er from  havmg  mvested  his  capital  and  labor  in  impfovLLts  on Tn 
unproductive  property  and  converted  it  into  a  productive  one      Th" 

of  uid^froTT'h'r "^'^•^-  ^^  ^'^"'  ^''^  ''^'  '^^  ^-  -luaTfon 
t£:l':^^^^^^^^^^  -—'-  --^^  '^  -^-^-ed  would  be 

Lastly,  if  the  justice  of  the  principle  of  an  Increment  Tax  be  con- 
ceded, what  guarantee  is  there  that  it  will  be  limited  to  i%  of'he  va^ue 
of  the  increment?     There  seems  to  be  nothing  to  prevent  the  ^Jd 
of  the  increment  from  being  taken,  except  the  whim  of  the  lawmrkers 

to  our^'Z'^of^r  t^"  '""^"^"^  ^'"^  ''  '  ^^^^^^"  ^^-  -^  fitted 
L       wl  ^''^^'''"^  ^'  ^'  P^y  ^"  Increment  Tax  now;  it  will 

dminish  the  amount  of  capital  invested  in  real  estate,  thereby  r  tardTng 
real  estate  development;  it  will  discourage  enterprise  by  taking  away 

5'intTret  "'"'"'"'  ^"  "^^  ''''''''  ''  ^^^  -^  ^"^^  ^  deducZ 

of  interest  on  investments  and  the  development  profit  to  be  taken  out 

before  it  is  imposed ;  it  will  bear  most  heavily  on  suburban  development 

where  the  increment  is  deferred  for  a  long  time  while  the  investment  i^ 

ncreasing;  while  the  community  may  be  able  by  it  to  collect  an  extra 

me;t  oTclS"  "  "'"  "  '''"  "'^'  ''""^'  '''  '"^^"^^^^- 

CYRUS  C.  MILLER, 

JOHN  J.  HALLERAN, 
GEO.  V.  MULLAN. 
108 


INCREMENT  TAX. 
Dissenting  Memorandum  By  Messrs.  Leubuscher  and  Howe. 

We  oppose  the  proposed  tax  upon  increases  in  land  values  for  the 

following  reasons: 

1.  The  yield  from  an  Increment  Tax  will  be  small,  especially  in 
comparison  with  the  needs  of  the  city.  There  will  be  many  complexi- 
ties in  administration,  particularly  when  property  is  subdivided.  Such 
a  tax  will  also  lead  owners  to  bring  pressure  on  the  Tax  Department  to 
keep  down  the  normal  increases  in  assessed  valuations,  and  will  invite 
litigation  over  assessments. 

2.  The  Increment  Tax  discriminates  against  the  small  home  own- 
ers in  the  outlying  boroughs  for  the  benefit  of  the  multimillionaire  land 
owners  of  Manhattan.  A  large  portion,  if  not  most,  of  the  land  in  Man- 
hattan, has  now  a  capitalized  congestion  selling  price  and  assessed  valua- 
tion, and  it  will  not  increase  greatly  in  assessed  value  for  many  years, 
while  the  city  needs  a  large  additional  revenue  at  once.  The  assessed 
value  of  land  in  Manhattan  is  this  year  $3,184,445,000.  The  assessed 
value  per  acre  of  land  in  the  five  boroughs  of  the  city  this  year  (1915) 
is  as  follows:  Manhattan,  $226,844;  The  Bronx,  $13,288;  Brooklyn, 
$15,855;  Queens,  $3,782;  Richmond,  $1,123. 

The  State  census  shows  that  the  population  of  Manhattan  is  sta- 
tionary or  decreasing ;  so  that  the  large  increases  in  the  assessed  value 
of  land  in  the  future  must  occur  in  the  outlying  boroughs,  where  there 
is  much  wider  distribution  of  land  ownership.     This  will  be  caused  by 
new  subways,  etc.    Ninety-nine  families  own  nearly  one-seventh  of  the 
assessed  value  of  land  in  Manhattan,— $450,000,000;  but  they  own  only 
about  one-seventieth  of  the  assessed  value  of  land  in  The  Bronx  and 
Brooklyn— $17,000,000.     With  a  super-tax  on  land  values  of  2  mills 
(20  cents  per  $100)  these  ninety-nine  families  would  pay  annually  about 
$946,000,  while  with  the  proposed  land  Increment  Tax,  even  assuming 
an  annual  increase  of  land  values  of  4%»  they  would  pay  only  $189,000,— 
while  they  probably  would  not   pay  $75,ooo.     There  are  only  about 
30,000  owners  of  land,  most  of  them  well  to  do,  in  the  Borough  of  Man- 
hattan, and  the  land  Increment  Tax  would  tax  the  small  home  owners 
in  the  outlying  boroughs  for  their  benefit. 

3.  The  Increment  Tax  is  discriminatory  in  that  it  favors  the  finan- 
cial beneficiaries  of  past  governmental  expenditures  against  those  who 
will  benefit  from  such  future  expenditures.  The  majority  say  that  this 
tax  "affects  only  future  increases  of  land  value  and  is  founded  on  and 
recognizes  to  the  full  the  existing  capital  value  of  land." 

4.  The  Increment  Tax  can  be  successful  only  as  a  revenue  measure 
if  there  are  great  and  continuing  increases  in  land  values,  which  can 
occur  only  if  rents  are  continually  forced  up  by  increasing  congestion 
of  population  and  business.     Thus  the  adoption  of  an  Increment  Tax 

109 


f 


1  y\ 


commits  the  government  to  a  policy  contrary  to  the  public  welfare  that 
demands  relief  from  congestion  and  exorbitant  rents. 

5.  The  English  Parliamentary  Land  Enquiry  Committee  after 
studying  both  systems  (Increment  Tax  and  Super  Tax)  recommended 
the  uniform  super  tax  upon  all  land  values.  It  stated:  "Every  local 
authority  should  be  required  to  raise  by  a  rate  (tax)  on  site  values  the 
whole  amount  by  which  its  expenditure  out  of  rates  in  any  future 
year  exceeds  its  expenditure  in  the  year  immediately  preceding  that  in 
which  this  proposal  comes  into  force." 

6.  It  is  as  illogical  to  levy  a  tax  only  on  future  increases  in  land 
values,  as  it  would  be  to  levy  an  income  tax  only  on  increases  in  in- 
comes. 

7.  It  will  render  more  difficult  the  adoption  of  a  super  tax  on  land 
values;  for  it  will  be  claimed  that  the  imposition  of  an  Increment  Tax 
was  tantamount  to  a  declaration  that  the  then  existing  land  values 
should  forever  after  be  held  sacrosanct. 

CONCLUSION. 

The  majority  say:  "The  completion  of  the  vast  scheme  of  rapid 
transit,  costing  about  $350,000,000,  and  for  which  the  taxpayers  have  in 
large  measure  to  pay,  will  substantially  increase  land  values  in  some 
sections  of  the  city,  and  perhaps  in  all  of  the  boroughs."  This  recog- 
nition by  the  majority  of  the  proper  source  of  revenue  for  municipal 
purposes, — the  land  values  of  the  city  which  they  admit  are  created  by 
municipal  expenditures  paid  for  by  the  people — only  the  more  con- 
clusively shows  the  futility,  as  well  as  the  injustice,  of  their  proposals 
for  securing  additional  revenue. 

FREDERIC  C.  LEUBUSCHER, 
FREDERIC  C.  HOWE, 


5.  SUPER-TAX  ON  LAND  VALUES. 

Memorandum  By  Messrs.  MuUan  and  Others. 

It  was  suggested  as  an   available   means  of  procuring  additional 
revenue,  that  a  super-tax  be  imposed  on  land  values.    The  discussion  of 
this  particular  device  was  so  meagre  as  not  to  elicit  much,  if  anything, 
in  the  way  of  argument  for  and  against,  being  little  more  than  a  con- 
sideration of  and  deliberation  upon  the  form  of  the  vote  to  be  taken  upon 
the   proposal.     An   overwhelming   majority    of   the    Committee    voted 
against  a  super-tax,  which  action  served  to  check  further  discussion  of 
the  proposal  whether  regarded  either  as  a  temporary  expedient  or  as 
an  expression  of  principle.     It  is  to  be  assumed  that  the  majority  of 
the  Committee  were  of  the  opinion  that  the  adoption  of  such  a  measure 
of  relief  would  be  inadvisable  for  the  obvious  reason  that  instead  of 
relieving  the  already  greatly  overburdened  realty  base  the  imposition 
of  a  super-tax  would  be  adding  to  realty  one  more  load,  possibly  the 
last  straw.    It  is  difficult  to  conceive  of  a  form  of  taxation  better  calcu- 
lated to  destroy  realty  values.     Its  only  recommendations  are  the  ease 
and  simplicity  of  its  levy  and  collection,  virtues  full  of  menace  to  the 
land   owner.     Once   establish   such   a   precedent,   and   every  owner   of 
realty  must  be  kept  in  a  state  of  constant  terror,  realizing  that  as  a 
budget  soars  so  would  soar  the  tax  on  his  property,  regardless  of  the 
existence  and  extent  of  other  forms  of  wealth  available  for  taxation.    A 
super-tax  is  one  of  the  various  forms  into  which  the  single  taxers  mould 
their  convictions.     It  fastens  itself  upon  the  thing  that  to  them  should 
furnish  the  sole  basis  of  taxation,  land.    The  adoption  of  such  a  device 
would  be  a  beginning,  an  entering  wedge,  a  step  in  the  direction  of  their 
goal.    Every  argument  against  the  single  tax  is  an  argument  against  a 
super-tax;   the   difference   is   merely  one   of   degree.     The   arguments 
against  the  exemption  of  improvements  from  taxation,  stated  in  the 
majority  report  upon  that  question,  make  unnecessary  any  more  ex- 
tended or  detailed  discussion  of  this  proposal. 

GEO.  V.  MULLAN, 
ALFRED  E.  MARLING, 
COLLIN  H.  WOODWARD, 
JOSEPH  N.  FRANCOLINI, 
CYRUS  C.  MILLER, 
DAVID  RUMSEY. 


110 


111 


J 


I"  'H 


:i , 


i  "^ 


I!'     i  r   ■' 


I 


, 


SUPER-TAX. 

Concurring  Memorandum  By  Messrs.  Field  and  Others. 

We  concur  in  the  recommendation  of  the  Committee  opposing  a 
super-tax  on  land  values. 

FRANK  HARVEY  FIELD, 
JOHN  J.  HALLERAN, 
HAMILTON  HOLT, 
JEREMIAH  W.  JENKS, 
ARDOLPH   L.  KLINE, 
WALTER  LINDNER, 
LOUIS  HEATON  PINK, 
OSCAR  R.  SEITZ, 
FREDERIC  B.  SHIPLEY, 
CHARLES  T.  WHITE. 

SUPERTAX. 

Concurring  Memorandum  By  Mr.  Simon. 

I  concur  in  the  opinion  of  the  Committee  as  expressed  in  the  Chair- 
man's report  that  a  super-tax  on  land  is  inadvisable  and  undesirable. 

ROBERT  E.  SIMON. 

SUPER-TAX. 
Dissenting  Memorandum  By  Professor  Seligman. 

Although,  as  a  member  of  the  majority  of  the  Committee,  I  have 
expressed  my  conviction  that  both  according  to  the  general  principles 
and  in  view  of  the  particular  situation  in  New  York,  the  exemption  of 
buildings  from  taxation  is  inadvisable,  it  remains  nevertheless  true,  in 
my  opinion,  that  we  should  regard  with  open  minds  the  advisability 
of  placing  in  the  future  an  increasing  burden  upon  land  values. 

While  I  hold  the  arguments  of  the  single  taxers  to  be  erroneous,  I 
agree  with  the  majority  of  the  modern  economists  in  the  belief  that 
land  values  afford  an  especially  promising  and  suitable  basis  for  local 
taxation.  I  do  not  believe  that  land  values  should  form  the  exclusive 
basis  of  taxation,  but  I  do  think  that,  under  certain  conditions,  a  larger 
revenue  may  be  derived  from  that  source  than  is  the  case  at  present. 
The  majority  of  the  Committee  are  clearly  of  this  opinion,  as  is  evi- 
denced by  the  fact  that  they  have  recommended  an  increment  tax  on 
land  values.  While  I  have  been  glad  to  sign  that  recommendation  as 
a  member  of  the  Committee,  I  feel  that  very  much  the  same  argument 
may  be  utilized  in  favor  of  a  carefully  devised  super-tax  on  land  values. 
I  do  not,  of  course,  believe  that  both  an  Increment  Tax  and  a  super- 

112 


tax  on  land  values  should  be  levied  at  the  same  time;  but  I  desire  to  set 
forth  the  reasons  why,  in  my  opinion,  a  super-tax  on  land  values  may, 
if  necessary,  be  utilized  in  lieu  of  an  increment  tax  on  land  values. 

As  has  been  pointed  out  in  the  majority  report  on  the  untaxing  of 
buildings,  I  do  not  agree  with  many  of  the  stock  arguments  advanced 
by  the  single  taxers.     I  do  not  think  that  land  is  so  entirely  different 
from  other  forms  of  property  as  to  justify  the  single  tax.     I  do  not 
believe  that  an  increment  tax  on  land  values  is  needed  to  force  land  into 
use,  since  under  present  conditions  of  taxation  in  New  York  City  it 
does  not  pay  to  hold  land  out  of  use.    I  do  not  believe  that  taxes  should 
be  levied  on  land  in  order  to  free  products  of  industry,  because  this  as- 
sumes that  taxes  are  generally  or  must  otherwise  be  levied  upon  such 
property;  whereas,  as  was  stated  in  the  majority   report,  the  whole 
trend  of  modern  taxation  is  to  take  income  and  not  property  as  the 
basis  of  taxation,  and  there  are  many  incomes  in  modern  times  which 
are  not  derived  from  property  at  all,  but  from  all  kinds  of  privileges 
and  relations  of  an  economic  kind.     I  do  not  believe  that  land  values 
should  be  taxed  for  the  reason  that  property  in  land  is  unjustifiable.     I 
do  not  believe  that  land  values  should  be  taxed  in  any  exclusive  sense 
in  order  to  lessen  the  number  of  those  who  get  incomes  without  earning 
them ;  for,  in  my  opinion,  not  alone  is  land  only  one  of  the  sources  of  such 
unearned  incomes,  but  the  revenue  from  land  is  sometimes  earned  in  the 
same  sense  as  the  revenue  from  anything  else  which  is  based  upon  care, 
attention  and  good  business  judgment. 

Despite  these  facts  I  think  that  a  good  case  may  nevertheless  be 
made  out  for  a  greater  taxation  of  land  values.  Land  values,  in  a  grow- 
ing city,  are  apt  to  increase,  notwithstanding  periods  of  temporary 
regression.  Land  owners,  while  they  do  not  form  the  only  class  of 
people  that  benefit  from  city  expenditures  and  while  they  are  not  the 
sole  class  of  the  community  that  possess  an  ability  to  contribute  to  the 
communal  burdens,  are  nevertheless  in  a  better  position  than  almost  any 
other  class  to  amortize  any  increasing  burden  of  taxation. 

Furthermore,  while  land,  indeed,  does  not  constitute  a  monopoly 
(for  the  supply  of  urban  land  may  undoubtedly  be  augmented  by  draw- 
ing upon  outlying  districts)  land  none  the  less  differs,  not  indeed  from 
all  -other  kinds  of  wealth,  but  from  many  other  kinds  of  wealth,  in  that 
the  increased  supply  can  be  secured  only  at  an  increased  cost ;  that  is, 
while  the  tendency  of  most  manufactured  products  is  to  fall  in  price 
with  the  development  of  science,  the  price  of  land  like  that  of  most 
raw  products  tends  to  increase  in  price.  The  growth  of  demand,  there- 
fore, acts  differently  in  the  case  of  land  and  natural  products  from  what 
it  does  in  the  case  of  most  manufactured  products.  It  is  not  a  clear 
distinction  between  land,  on  the  one  hand,  and  labor  products  on  the 
other;  but  it  is  a  distinction  between  those  forms  of  wealth  which  re- 
spond to  an  increased  demand  at  the  same  or  a  decreasing  cost,  and  those 

113 


M 


i 


\ 


1 


m 


ti 


(' 


J.^ 


i 


I 


llll 

I! 


ir 


■■• 


\m 


•  !  Hlf  < 


which  respond  to  this  demand  at  an  increasing  cost.  Land  differs  from 
other  things,  in  short,  not  absolutely  in  kind,  but  simply  in  the  degree 
to  which  increase  in  demand  affects  change  in  price.  Moreover,  the 
land  value  tax  is  perhaps  of  all  taxes  the  simplest  to  assess  and  the 
easiest  to  collect.  The  land  value  tax,  again,  is  perhaps,  of  all  taxes, 
the  one  to  which  a  community  can  most  readily  adjust  itself.  The  land 
value  tax,  finally,  is  one,  which  if  carefully  devised  and  administered, 
will  tend  to  cause  the  least  interference  with  economic  and  social  con- 
ditions. In  short,  while  land  does  not  differ  in  essence  from  all  other 
forms  of  wealth,  it  does  differ  in  degree  from  some  other  forms  of  wealth, 
and  it  is  precisely  this  difference  in  degree  which  justifies,  in  my  opinion, 
a  somewhat  higher  tax  upon  land. 

The  principles,  which,  in  my  judgment,  should  obtain  in  applying 
the  doctrine  of  increased  land  values  are  as  follows: 

(i).  A  portion  of  the  increased  revenues  that  are  needed  should 
come  from  other  sources.  In  the  opinion  of  a  majority  of  this  Com- 
mittee this  portion  of  additional  revenues,  as  we  have  seen,  should  come 
from  a  tax  on  the  general  income  of  the  inhabitants,  through  either  a 
direct  income  tax  or  a  presumptive  income  tax.  The  remainder  may 
well  come  from  an  additional  tax  on  land  values  either  in  the  shape  of 
an  increment  tax  or  in  the  shape  of  a  super-tax. 

(2).  Care  must  be  taken  not  to  interfere  with  existing  land  values. 
The  chief  objection  as  we  have  seen,  to  the  untaxing  of  buildings,  is  that 
it  may  decrease  the  selling  value  of  the  property  of  entirely  innocent 
holders.  Such  a  glaring  infraction  of  property  rights  could  be  justified 
only  by  considerations  of  overwhelming  necessity,  and  such  considera- 
tions are  entirely  lacking  in  this  case.  It  is,  therefore,  highly  desirable 
that  in  the  assessment  of  any  super-tax  on  land  values  a  provision  be 
introduced  that  the  additional  tax  when  capitalized  should  never  exceed 
any  intervening  increase  in  land  values;  for  only  in  this  way  can  the 
above  injustice  be  prevented. 

It  will  be  asked  what  is  the  difference  between  a  super-tax  and  an 
increment  tax.  The  difference  is  obvious.  It  is  true  that  the  tax  will 
not  be  assessed  in- either  case  unless  there  has  been  an  increase  in  land 
values;  but  in  the  case  of  an  increment  tax,  the  tax  is  proportionate 
to  the  increment,  while  in  the  case  of  the  super-tax  the  tax  stands  in  a 
definite  relation  not  to  the  increase  in  land  value  but  to  the  capitalized 
value  of  the  land.  The  super-tax,  in  other  words,  is  a  more  compre- 
hensive tax  than  the  increment  tax. 

The  difference  can  be  illustrated  by  an  arithmetical  example.  Let 
us  assume,  for  instance,  that  a  given  plot  of  land  has  increased  in  value 
in  a  definite  period  from  $10,000  to  $12,000.  An  increment  tax  of  say 
one  per  cent,  on  the  $2,000  increase  would  amount  to  $20.  These  $20 
capitalized  at  five  per  cent,  amount  to  $400,  thus  making  the  selHng  value 
of  the  land  $11,600  after  the  tax  was  imposed.     On  the  other  hand,  let 

114 


us  assume  that  a  super-tax  of  as  much  as  three  mills  on  the  dollar  is 
needed.  A  three-mills  tax  on  $12,000  would  amount  to  $36.  Thirty- 
six  dollars  capitalized  at  the  rate  of  five  per  cent,  equals  $720.  The  con- 
sequence is  that  the  property  will  advance  in  price  from  $10,000  to  $11,- 
280  and  that  the  tax  will  stand  because  the  capitalized  tax,  or  $720,  is 
less  than  the  increase  of  land  values,  or  $1,280.  If,  however,  the  in- 
crease in  land  values  had  been  less  than  the  capitalization  of  the  super- 
tax, the  super-tax  would  have  to  be  diminished  in  proportion. 

The  practical  difference  between  the  increment  tax  and  the  super- 
tax is  that  the  super-tax  would  tend  to  take  a  larger  share  of  the  incre- 
ment, and  that  it  might  be  simpler  to  levy  a  low  super-tax  than  a  high 
increment  tax. 

The  advantages  of  a  super-tax  as  against  the  untaxing  of  buildings 
are,  therefore,  as  follows: 

(i).  There  would  be  no  injustice  done  to  the  present  owners  of 
land. 

(2).  There  would  be  no  reduction  in  the  assessed  valuations  of 
real  estate,  thus  eliminating  all  possibility  of  embarrassment  in  either 
the  debt  situation  or  the  tax  situation. 

(3).  There  would  be  only  a  slight  slackening  in  the  increase  of 
land  values  which  may  be  normally  expected  in  a  growing  city. 

(4).  If  the  super-tax  is  definitely  fixed  in  advance,  it  would  be  so 
amortized  as  to  create  practically  no  embarrassment  to  future  holders 
of  land. 

(5).  To  the  extent  that  the  super-tax  is  levied,  it  would  tend  to 
prevent  that  part  of  the  increase  of  rent  which  is  due  to  a  tax  on  build- 
ings. It  would  be  a  mistake,  indeed,  as  was  pointed  out  in  the  majority 
report  on  the  untaxing  of  buildings,  to  think  that  a  change  in  rent  is 
to  be  measured  by  the  change  in  the  rate  of  the  tax  on  buildings;  for 
there  are  many  other  factors,  as  we  have  seen,  which  affect  the  relative 
cost  of  buildings.  While,  however,  due  allowance  must  be  made  for 
these  other  factors,  it  is  none  the  less  probable  that  a  failure  to  increase 
the  rate  on  buildings  will  tend,  on  the  whole,  to  prevent  any  correspond- 
ing increase  in  rents. 

I  think,  then,  that  the  future  of  municipal  revenues,  not  alone  in  the 
United  States  but  throughout  the  world,  has  in  store  for  us  a  reliance 
on  the  one  hand  on  increased  income  taxes,  in  order  to  tap  the  abilities 
of  those  who  profit  by  the  opportunities  of  our  large  cities ;  and  on  the 
other  hand,  on  an  increase  of  revenue  from  land  values  in  order  to  reach 
the  abilities  of  those  who  derive  additional  and  increased  benefits  from 
the  special  privileges  afforded  by  our  growing  cities. 

I  believe,  in  short,  that  a  super-tax  on  land  values,  carefully  re- 
stricted and  equitably  enforced,  will  form  a  precious  source  of  increased 
revenue  to  the  cities  of  the  future;  that  it  will  tend,  on  the  whole,  to 


m 


115 


secure  advantageous  social  results;  and  that  it  will  not  be  attended  by 
injurious  consequences  either  to  innocent  property  owners  or  to  the  com- 
munity at  large. 

EDWIN  R.  A.  SELIGMAN. 


SUPER-TAX. 
Dissenting  Memorandum  By  Messrs.  Lcubuscher  and  Hawc. 

This  is  the  proposition  that  was  submitted  to  the  Committee :  That 
a  part  of  the  additional  revenue  required  by  the  city  be  raised  by  a  super- 
tax on  land  values.  The  majority  report  is  in  error  in  stating  that 
"Every  argument  against  the  single  tax  is  an  argument  against  a  super- 
tax." The  single  tax  involves  two  things :  First,  the  taking  by  taxation 
of  substantially  all  the  economic  rent.  Second,  the  abolition  of  all 
other  forms  of  taxation.  A  super-tax  means  that  the  present  gen- 
eral tax  on  both  land  and  improvements,  besides  a  multitude  of  other 
taxes,  remain  undisturbed,  but  that,  in  order  not  to  increase  the  gen- 
eral tax  rate,  a  small  additional  tax  be  levied  on  land  alone.  If  an 
income  or  abilities  tax  were  adopted,  they  might  not  furnish  the  neces- 
sary additional  revenue,  so  that,  if  the  principle  of  a  super-tax  were  also 
adopted,  the  balance  of  additional  revenue  might  be  secured  in  that 
way.  For  example :  If  twenty-five  million  dollars  additional  revenue  were 
required  and  it  was  thought  unwise  to  increase  the  general  tax  rate,  and 
the  income  or  abilities  tax  raised  only  twenty  millions,  the  additional 
five  million  dollars  could  be  procured  by  a  one-mill  tax  on  the  five  bil- 
lions of  land  values.  This  would  be  no  great  hardship,  even  from  the 
conservative  standpoint,  on  real  estate.  A  typical  tenement  house,  for 
instance,  which  was  worth  $30,000  for  the  building  and  $10,000  for  the 
land,  now  pays  about  $760  tax,  and  a  super-tax  of  one  mill  on  the  $xo,- 
000  lot  would  add  only  $10  to  the  tax. 

The  majority  speak  of  "the  already  greatly  overburdened  realty 
base.'*  As  pointed  out  in  the  minority  report  on  the  untaxing  of  build- 
ings, leal  estate  is  less  burdened  with  taxes  in  this  year  of  grace  191 5, 
than  it  was  thirty-five  years  ago.  According  to  the  191 3  report  of  the 
Department  of  Taxes  and  Assessments,  in  1880  real  estate  paid  87% 
of  the  total  budget,  and  in  191 3,  it  paid  only  75%  thereof. 

In  view  of  the  very  meagre  majority  report  on  the  question,  it 
would  be  well  to  state  the  reasons,  founded  on  both  justice  and  expedi- 
ency, why  the  city  should  have  the  power  to  impose  a  super-tax  on  land 
values  for  the  purpose  of  raising  additional  revenue. 

The  per  capita  cost  of  local  government  and  the  city's  share  of  the 
State  Direct  Tax  is,  in  round  figures,  $38,  or  $190  for  a  family  of  five. 

Mayor  Mitchel  testified  before  the  Joint  Legislative  Committee  on 
Taxation  that,  even  if  the  cost  of  government  can  be  kept  at  its  present 


level,  the  city  will,  in  1920,  have  to  raise,  exclus.ve  of  the  State  Du^ecx 
Sx  $34,554,000  more  than  its  present  budget  of  nearly  $200,000,000. 

The  local  budget  will  be,  in  1920,  about  $250,000,000.  Assuming 
an  average  increase  of  population,  this  will  be  about  $47  per  cap.ta  or 
$235  for  a  family  of  five,  in  addition  to  the  State  and  Federal  md.rect 

^''''^The  per  capita  cost  of  the  Federal  Government  is  about  $7,  of  the 
State  government,  about  $5 ;  so  that  even  if  there  are  no  """^"^^l  '"- 
creases  in  Federal  and  State  expenditures  by  1920,  the  average  charge 
per  flmily  in  New  York  City  for  the  privilege  of  bemg  governed  will 

''  ThTterm'new  sources  of  revenue"  should  be  discarded,  as  it  i. 
inaccurate  There  are  only  two  sources  of  revenue:  Earmngs.  current 
or  accurlulated.  and  Ground  Rents.  It  is  agreed  that  all  ta-s  -cep 
?Lse  on  Inheritances,  Incomes  and  Land  Values,  can  be  shifted  to  he 
user  of  the  article  or  service  taxed.  It  is  agreed  that  unw.se  or  too 
high  taxes  can  destroy  almost  everything  except  land  values. 

The  city  has  undertaken  public  improvements,  transit  lines,  water 
supply,  etc.,  which  will  be  largely  wasted  unless  the  population  m- 
rreases  raoidlv  and  is  self-sustainmg.  .      ,       . 

"     The  avera'ge  per  capita  net  debt,  in  19-,  of  all  cities  having  a  popu- 
lation of  30.000  or  over,  was  $68.74-    That  of  New  York  was  $.5^57.  o 
Chicago,  $28.62;  of  Philadelphia,  $60.64;  of  St.  Louis,  $33-72.  and  ot 

"^^The'fifan'dal  benefit  of  many  of  the  improvement,  for  which  the 
citv's  ereat  debt  was  incurred,  will  be  realized  within  the  next  few 
yelrs  5  the  land  owners  of  the  city  in  the  increased  selling  price  of 

land  —if  population  increases. 

As  was  clearly  shown  at  the  public  hearings,  high  selling  prices  of 
land  are  a  detriment  to  the  producers  and  workers  of  any  community, 
because  they  are  the  result  of  large  ground  rents. 

New  York  cannot  afford  to  make  it  any  more .  diflficult  or  disad- 
vantageous for  manufacturers  to  locate  here;  and  large  increases  within 
the  next  few  years  in  the  selling  price  of  land  would  operate  against  the 
increase  of  factories  and  industry.  * 

Judging  from  the  experience  of  the  last  ten  years  and  with  the 
present  tax  rate  on  land  values,  the  net  increase  m  the  selhng  price 
of  land  would  be  at  least  $1,000,000,000,  and  probably  $i,20o,o<»,ooo 
during  the  next  decade.  Such  an  increase  in  the  selling  price  of  land 
would  require  $50,000,000  to  $60,000,000  more  ground  rent  to  be  paid 
the  land  owners  on  this  increase,  in  addition  to  the  $250,000,000  net 
ground  rents  they  now  receive,  before  the  real  producers  of  the  city  are 
requited  for  their  labor  and  industry. 

It  would  clearly  be  to  the  advantage  of  every  one  in  New  York 
City,  except  a  few  land  owners,  as  such,  to  have  the  selling  price  of  land 

117 


116 


K  ■■ 


[i  I 


here  remain  stationary,  or  increase  only  very  little  in  the  future.  This 
is  fully  as  important  for  the  city's  development  and  prosperity  as  se- 
curing additional  revenue. 

The  two  desiderata  can  be  achieved  effectively  and  equitably  by 
recovering  annually  for  the  maintenance  of  our  local  government  a  part 
at  least  of  the  increase  in  the  selHng  price  of  land,  by  means  of  a  super- 
tax on  land  values. 

In  a  very  few  cases,  this  might  work  a  temporary  hardship,  but, 
owing  to  the  concentration  of  the  ownership  of  valuable  land  in  New 
York  City,  this  would  be  the  fairest  way  to  secure  additional  revenue 
for  local  purposes  on  the  basis  of  financial  benefit  received.  It  would 
also  result  in  reaching  those  who  do  not  pay  their  full  share  of  the  cost 
of  local  government. 

One  of  the  arguments  in  support  of  the  residence,  occupation  and 
salary  taxes  is  that  they  will  reach  the  non-resident  who  makes  his 
money  in  this  city  and  lives  elsewhere.  It  is  admitted  that  they  will 
not  reach  the  real  non-residents,  like  William  Waldorf  Astor.  But  it 
is  also  admitted  that  a  super-tax  on  land  values  will  reach  the  real  non- 
resident. 

The  amount  New  York  City  must  raise  next  year  is,  in  round  fig- 
ures, $213,000,000,  or  about  $14,000,000  more  than  this  year.  Even  if 
the  entire  additional  revenue  were  raised  by  a  super-tax  on  land  values, 
the  rate  on  sites  would  be  increased  only  three  mills,  and  the  rate  on 
buildings  and  personal  property  would  remain  at  $1.90. 

With  this  super-tax  rate,  the  one  hundred  families  who  are  the 
owners  of  record  of  land  assessed  for  $473,808,075,  located  chiefly  in 
Manhattan,  would  pay  $1,411,424  more  than  at  present.  Under  a  gen- 
eral tax  rate  of  two  mills  (approximately  the  increase  in  the  rate  re- 
quired to  raise  $14,000,000  additional  revenue),  they  would  advance 
only  $1,262,646,  because  the  assessed  value  of  the  buildings  of  which 
they  are  the  owners  of  record  is  only  $157,515,233.  Since  they  would 
be  able  ultimately  to  shift  the  tax  on  their  buildings  to  their  tenants,— 
that  is  $315,030 — their  own  contribution  out  of  their  present  ground 
rent  of  about  $20,000,000,  would  be  only  $947,616,  or  $473,808  less  than 
they  would  pay  with  a  super-tax  of  three  mills  on  land  values. 

These  hundred  families  include  most  of  the  wealthiest  in  the  city 
and  those  whose  wealth  is  due  to  the  growth  of  the  city's  population 
and  industry  and  its  expenditures. 

Two  thousand  families  would  justly  pay  approximately  half  of 
the  $14,000,000  with  this  super-tax  on  land  values,  because  these  two 
thousand  families  have  been  to  this  extent  the  fianancial  beneficiaries  of 
the  city's  growth,  industry  and  expenditures. 

The  owner  of  a  small  home  whose  site  is  assessed  for  $1,000,  and 
building  for  $3,000  would  pay  $8  with  a  general  increase  of  two 
mills,  and  only  $3  with  a  super-tax  of  three  mills  on  land  values. 

118 


The  owner  of  a  $30,000  tenement  on  a  $10,000  lot  would  ultimately 
oav  $^0  more  with  the  super-tax  on  land  values  as  agamst  the  $80  he 
would  pay  with  a  two  mills  increase  in  the  general  tax  rate  ot  which 
he  mieht  collect  $60  from  his  tenants  by  increased  rent  or  decreasing 
service  He  would  pay  personally  about  $10  more  with  the  land  values 
suoer-tax  than  with  the  two  mills  general  increase  in  the  tax  rate. 

The  maintaining  of  the  selling  price  of  land  at  about  its  present 
figure,  and  the  prevention  of  speculative  increases,  together  with  the 
knowledge  that  there  would  not  be  any  increase  in  the  tax  rate  on  build- 
ings  or  machinery,  would  encourage  manufacturers  to  locate  here,  and, 
therefore,  be  of  direct  advantage  to  the  city  as  a  whole. 

A  far  greater  advantage  would  be  the  exemption  of  the  tools  of 

production.  ,  t.     u 

Even  those  who  are  opposed  to  the  untaxing  of  buildmgs  should 

not  object  to  the  super-tax  on  land  values,  because  it  will  not  reduce 

the  present  selling  price  of  land  materially,  and  w.ll  not  affect  the 

status  quo.  FREDERIC  C.  LEUBUSCHER. 

FREDERIC  C.  HOWE. 


SUPER-TAX. 

Dissenting  Memorandum  By  Messrs.  Purdy  and  Wilcox. 

The  City  of  New  York  should  have  power  to  levy  a  super-tax  on 
the  value  of  land.  Various  reasons  for  conferring  this  power  upon  the 
city  are  well  presented  by  Prof.  Seligman  in  his  memorandum,  and  other 
good  reasons  are  presented  in  the  memorandum  signed  by  Mr.  Leu- 
buscher,  and  others. 

One  fact  should  be  stated,  which  is  not  stated  in  these  opmions. 
and  that  is  that  there  is  a  tendency  to  over-assess  buildings,  which    it 
is  impossible   for  the  best   assessing  department   to  counteract.     As- 
sessors must  follow  the  evidence  of  value.     When  property  rises  in 
value  assessments  must  follow  and  therefore  must  always  be  some- 
what lower  than  full  value.    When  the  value  of  property  falls  for  the 
same  reason  assessments  must  always  be  somewhat  higher  than  full 
value     In  this  city,  land  generally  appreciates  in  value,  whereas  build- 
ings always  depreciate  and  decline  in  value.     Not  only  are  buildings 
subject  to  depreciation  from  use  but  more  important  in  this  city  is  the 
depreciation  due  to  obsolescence.     Good  buildings  frequently  lose  all 
their  value  because  of  change  of  character  of  neighborhood.    A  super- 
tax on  land  values  may  be  used  to  counteract  this  tendency. 

LAWSON  PURDY, 
DELOS  F.  WILCOX. 

119 


i 


hi: 


I 


SUPER-TAX. 

Dissenting  Memorandum  By  Mr.  Tomlin. 

I  dissent  from  the  recommendation  of  the  Committee  opposing  a 
super-tax  on  land  values  for  the  reasons  stated  in  my  memorandum  of 
dissent  from  the  majority  report  opposing  the  untaxing  of  buildings. 

FRANKLIN  S.  TOMLIN. 


\i: 


SUPER-TAX. 

Dissenting  Memorandum  By  Mr.  Binkerd. 

For  the  reasons  stated  in  my  dissenting  memorandum  on  the  un- 
taxing of  buildings,  I  believe  in  raising  additional  local  revenue  by  a 
super-tax,  or  an  unearned  increment  tax,  on  land. 

ROBERT  S.  BINKERD. 


I 


it 


t 


)  (I 


120 


. 


iir 


PART  THREE. 

MEMORANDUM   OF  BILLS  FOR  ADMINISTRATIVE 
CHANGES  UNANIMOUSLY  RECOMMENDED 

BY   THE    COMMITTEE 


BILL  NO.  I. 


Tax  Law,  Section  4,  Subdivision  7. 

Amend  by  omitting  the  words  "or  is  in  good  faith  contemplated" 
so  that  real  property  shall  not  be  exempt  when  vacant  though  owned 
by  a  charitable  or  other  such  corporation. 

This  subdivision  provides  for  the  exemption  of  the  property  of 
various  corporations  organized  exclusively  for  religious,  charitable, 
benevolent  and  other  like  purposes.  One  clause  of  this  subdivision, 
which  was  inserted  in  1891,  makes  exemption  depend  upon  the  state  of 
mind  of  the  officers  of  the  corporation  when  the  land  is  not  in  use  for 
the  purpose  of  the  corporation  by  reason  of  the  absence  of  suitable 
buildings.  As  the  property  may  still  be  exempted  if  the  erection  of 
suitable  buildings  *'is  in  good  faith  contemplated  by  such  corporation 
or  association,"  this  amendment  provides  for  the  omission  of  the 
words  above  quoted.  If  this  omission  is  made  exemption  will  depend 
on  the  actual  facts  and  not  upon  what  the  officers  of  the  corporation 
may  at  the  time  contemplate. 

BILL  NO.  2. 

Tax  Law,  Section  12. 

This  is  the  section  which  provides  for  the  taxation  of  the  personal 
estate  of  domestic  corporations.  Amend  by  omitting  the  provision  for 
the  deduction  of  surplus  and  the  provision  for  the  deduction  of  the  as- 
sessed value  instead  of  the  actual  value  of  real  estate.  The  change  will 
increase  the  revenue  from  domestic  corporations  to  some  extent,  per- 
haps $100,000. 

BILL  NO.  3. 

Tax  Law,  Section  45-a. 

Add  new  subdivision  to  Section  45-a  in  which  provision  shall  be 
made  for  the  State  Board  of  Tax  Commissioners  to  report  to  the  local 

121 


f  J 


assessors  throughout  the  State  an  identifying  description  of  real  prop- 
erty of  public  service  corporations  exclusive  of  their  special  franchise. 
In  tax  districts  which  have  tax  maps  such  description  shall  be  by  lot  and 
block  numbers.  The  State  Board  shall  report  the  value  of  the  land  as 
reported  to  them  by  the  owner  of  the  special  franchise,  the  reproduction 
value  and  present  value  of  buildings,  the  reproduction  value  and  present 
value  of  the  plant,  also  the  valuation  placed  by  the  State  Board  upon 
land,  buildings  and  plant  for  the  purpose  of  determining  the  amount  by 
which  the  gross  earnings  shall  be  reduced  on  account  of  the  ownership 

of  such  property. 

Increase  in  revenue  expected  on  account  of  the  receipt  of  such  in- 
formation, either  in  respect  of  the  assessment  of  special  franchises  or 
other  property  of  public  service  corporations,  at  least  $500,000. 

BILL  NO.  4. 

Tax  Law,  Section  48. 

This  section  provides  for  the  deduction  from  a  special  franchise 
tax  of  the  amount  paid  by  the  owner  of  the  special  franchise 
as  rental  for  the  franchise  and  any  sums  paid  which  are  in  the 
nature  of  taxes,  such  as  car  licenses,  etc.  The  operation  of  this  section 
was  in  many  cases  to  decrease  the  actual  tax  payments  made  by  the 
owners  of  special  franchises  to  a  sum  less  than  they  were  required  to 
pay  before  the  amendment  of  1899,  known  as  the  Special  Franchise  Tax 
Law.  This  section  should  be  repealed.  The  increased  revenue  will 
amount  to  about  $800,000. 


BILL  NO.  5. 
Tax  Law,  Section  204. 

By  this  section  the  Secretary  of  State  is  required  to  report  to  the 
State  Comptroller  certain  details  concerning  all  certificates  of  incor- 
poration and  amendments  to  such  certificates  filed  with  him.  Add  to 
this  section  the  requirement  that  the  Secretary  of  State  shall  send  a 
duplicate  report  to  the  assessors  of  each  town,  city  and  village  named 
in  a  certificate  of  incorporation  as  the  principal  place  of  business  of  the 
corporation. 

This  procedure  will  tend  to  increase  the  assessment  of  domestic 
corporations  at  least  throughout  the  State,  will  check  the  tendency  to 
have  the  principal  place  of  business  at  Esopus  or  Painted  Post  when 
the  principal  place  of  business,  in  fact,  is  in  New  York,  and  will  thus 
increase  the  number  of  corporations  taxable  in  New  York;  further,  it 
will  supply  information  to  the  New  York  Tax  Department  without  cost 
that  now  costs  at  least  $600  a  year  to  obtain. 

122 


BILL  NO.  6  (Became  Law,  Chapter  600,  Laws  of  1915)- 

Greater  New  York  Charter,  Section  926. 

When  the  charter  was  amended  to  provide  for  semi-annual  tax  pay- 
ments the  time  for  sending  unpaid  personal  taxes  to  the  marshal  was 
not  changed.  The  date  for  paying  personal  taxes  was  made  May  first, 
instead  of  October  first.  This  bill  changes  the  date  for  sending  per- 
sonal taxes  to  the  marshal  from  January  to  the  preceding  August.  This 
will  give  more  time  for  the  collection  of  personal  taxes  and  commence 
the  proceeding  earlier. 


123 


I 


h  ii- 


* 


EXHIBITS  ACCOMPANYING 

REPORT. 


UNTAXING  OF  BUILDINGS. 


QUESTIONS  PREPARED  BY  THE 
COMMITTEE  TO  BE  CONSIDERED 
IN  CONNECTION  WITH  PUBLIC 
HEARINGS,  AND  ANSWERS 
THERETO  SUBMITTED  BY 
VARIOUS  ORGANIZATIONS  AND 
INDIVIDUALS. 


COMMITTEE  ON  TAXATION. 


QUESTIONS  TO  BE  CONSIDERED  IN  CONNECTION 

WITH  PUBLIC  HEARINGS. 


I! 


Question  Series  i. 

ON  THE  EFFECT  OF  THE  UNTAXING  OF  BUILDINGS  UPON 
LAND  VALUES  AND  UPON  SPECULATION  IN  LAND. 

I  To  what  extent  has  the  development  of  land  values  in  different 
narts  of  the  city  been  irregular?  To  what  extent,  at  different  times  and 
Fn  different  portions  of  the  city,  have  the  land  values  decreased,  and 

what  have  been  the  causes  of  such  decreases?  

"''2  To  what  extent  may  we  expect  in  the  near  future  a  more  normal 
increase  in  land  values  than  during  the  past  few  years?  Wha  will  be 
the  probable  effect  of  the  new  subway  system  upon  and  values?  To 
what  extent  has  the  prospective  increase  been  discounted? 

1  What  proportion  in  the  amount  and  value  of  the  land  in  the 
several  boroughs  of  Greater  New  York  may  be  classed  as  appropnately 
improved?    What  proportion  is  inappropriately  improved?    What  pro- 

Dortion  is  unimproved? 

A  Can  the  transfer  of  the  tax  from  buildings  to  land  ever  mcrease 
the  value  of  improved  land?  For  instance,  if  there  are  two  parcels  of 
land,  each  worth  $100,000,  Parcel  A  having  land  worth  $70,000,  and  a 
building  worth  $30,000  and  Parcel  B  having  land  worth  $30,000,  and  a 
house  worth  $70,000,  if  buildings  are  exempted  from  ^axatio"  ^^.^^^ 
suming  that  the  value  of  Parcel  A  will  decrease,  will  the  capital  value 

of  Parcel  B  increase?    If  so,  why? 

^  How  frequently,  under  typical  conditions  in  New  York,  does  the 
nature  of  the  "appropriate  improvement"  of  a  parcel  of  land  change? 

6  What  are  the  standards  now  employed  in  fixing  land  values? 
What  part  is  played  by  the  prospective  use  value  in  the  future 

7  ^To  what^extent  are  so-called  "taxpayers"  erected  in  New  York 
Citv^  i  e  to  what  extent  are  cheap,  temporary  improvements  made  tor 
the  purpose  of  carrying  the  land  until  the  time  is  ripe  for  appropriate 

^^''"g^"  Are  SL^Tland  values  the  result  of  the  increase  of  population 
alone,  or  to  the  increase  of  the  community's  wealth?  •     xt.  „ 

Q  What  would  be  the  effect  on  the  aggregate  land  values  in  New 
York 'city,  and  separately  upon  improved  and  unimproved  land,  if  it 
were  known  that  the  population  of  the  city,  as  a  whole,  would  remam 

stationary. ^^  closely  is  the  estimated  future  growth  of  population  re- 
flected'in  present  land  values,  i.  e.,  how  far  do  present  values  include  a 

127 


I 


capitalization  of  the  additional  rental  values  which  are  expected  from 
an  increase  of  population  for  an  indefinite  period  in  the  future? 

11.  What  is  better  for  a  great  city,  high  land  values  or  low  land 
values? 

12.  To  what  extent  is  land  acquired  in  New  York  for  speculative 
purposes?  In  other  words,  is  land  purchased,  not  for  the  purpose  of  in- 
vestment or  use  by  improvement,  but  for  the  purpose  of  resale  at  a 
profit? 

13.  If  all  taxes  upon  buildings  were  transferred  to  the  land,  would 
the  effect  be  the  discouraging  of  land  speculation,  and  if  so,  would  this 
result  in  the  general  depreciation  of  land  values? 

14.  Assuming  that  these  results  would  follow,  would  the  social 
and  economic  effects  of  this  change  be  wholesome  or  otherwise? 

15.  What  are  the  relative  advantages  and  disadvantages  of  land 
speculation?  In  what  respect  does  land  speculation  differ  from  the 
speculation  carried  on  in  the  stock  and  produce  exchanges? 

16.  To  what  extent  is  unimproved  land  in  New  York  City  ripe 
for  improvement?  In  other  words,  to  what  extent  is  land  held  out  of 
use  which  ought  to  be  improved  immediately? 

17.  Assuming  that  the  transfer  of  the  tax  from  buildings  to  land 
would  tend  to  stabilize  values  and  check  speculation,  could  these  re- 
sults be  obtained  as  well  or  better  by  means  of  the  "land  increment 
tax?" 

18.  To  what  extent,  if  any,  would  the  transfer  of  the  tax  from 
buildings  to  land  tend  to  accentuate  the  depreciation  of  land,  when  for 
other  reasons  its  value  is  shrinking? 

19.  What  would  be  the  effect  upon  loans  in  a  case  where  the  trans- 
fer of  the  tax  from  buildings  to  land  will  neither  increase  nor  decrease 
the  amount  of  the  tax  levied  upon  a  particular  parcel  of  real  estate?  Will 
the  value  of  the  land  be  in  any  way  affected  by  the  transfer?  In  other 
words,  does  the  tax  on  a  building  have  the  same  effect  upon  the  value 
of  the  land  as  a  tax  levied  directly  upon  the  land  itself? 

20.  To  what  extent  is  the  land  of  New  York  owned  by  a  small 
number  of  owners  or  in  small  parcels  by  a  large  number  of  owners? 

21.  To  what  extent  are  real  estate  mortgages  in  New  York  City 
owned  in  large  lots  by  a  small  number  of  owners  or  in  small  lots  by  a 
large  number  of  owners? 

22.  Would  the  untaxing  of  buildings  increase  or  decrease  the 
taxes  paid  by  the  owners  of  skyscrapers,  who,  at  the  same  time,  owned 
the  land? 

23.  What  effect  would  the  untaxing  of  buildings  have  upon  the 
small  home  owners  in  the  various  boroughs  in  New  York?  Would  it 
affect  small  house  owners  in  Manhattan  like  those  in  Brooklyn? 

24.  What  effect  would  the  untaxing  of  buildings  have  upon  house 
owners  where  the  value  of  the  real  estate  is  from  ten  to  fifty  thousand 
dollars?    Would  the  effect  be  the  same  in  Manhattan  as  in  the  other, 
boroughs? 

25.  What  effect  would  the  untaxing  of  buildings  have  upon  the 
relatively  small  and  more  modest  owners  in  each  class  of  owners  of 
buildings,  as  compared  with  the  relatively  weathier  members  in  each 
class  ? 

26.  To  what  extent  can  the  effect  of  the  untaxing  of  buildings  upon 
land  values  be  predicted  with  accuracy  in  the  different  parts  of  the  city? 

128 


Question  Series  2. 

ON  THE  EFFECT  OF  THE  UNTAXING  OF  BUILDINGS  UPON 
BUILDING  OPERATIONS,  HOUSING  CONDITIONS. 

AND  CONGESTION. 

1.  Would  the  untaxing  of  buildings  stimulate  the  erection  of  build- 
ings?   If  so,  why? 

2.  Would  the  untaxing  of  buildings  encourage  the  preparation  ot 
vacant  land  for  use?  For  example,  low  lands  that  need  to  be  filled  m 
and  high  lands  that  need  to  be  graded  down? 

3.  Would  the  untaxing  of  buildings  hasten  the  replacement  of  old 
and  inappropriate  buildings  by  new  and  appropriate  buildings? 

4.  In  general,  would   the  untaxing  of  buildings  lead   to  a  more 

intensive  use  of  the  land? 

5.  Assuming  that  the  untaxing  of  buildings  would  tend  to  stimulate 
the  improvement  of  vacant  land,  would  this  effect  be  most  noticeable 
and  most  immediate  in  the  case  of  lands  nearest  the  business  centers, 
or  land,  which  for  other  reasons  is  the  most  valuable  of  the  lands  still 
unimproved?  When  would  the  new  equilibrium  be  reached  and  what 
would  be  the  final  result? 

6.  Would  the  untaxing  of  buildings  tend  to  bring  about  the  over- 
development of  the  most  valuable  lands?  For  example,  would  it  tend 
to  cause  the  erection  of  buildings  higher  than  would  normally  be  ap- 
propriate for  the  location? 

7.  Will  the  untaxing  of  buildings  tend  to  greater  compactness  m 
the  development  of  the  city?  In  other  words,  would  it  tend  to  cause 
the  chief  center  and  all  the  subcenters  to  be  built  up  solidly  rather  than 
in  a  straggling  and  irregular  manner? 

8.  Assuming  that  the  untaxing  of  buildings  would  tend  to  pro- 
mote compact  development,  to  what  extent  would  this  result  in  the  en- 
croachment upon  public  places,  or  in  the  occupation  for  building  pur- 
poses of  private  spaces  which  are  now  held  open,  either  intentionally  or 
otherwise,  for  the  public  good? 

9.  To  what  extent  would  the  untaxing  of  buildings  tend  to  the 
subdivision  of  parcels  of  land  or  to  the  covering  up  of  larger  proportions 
of  each  parcel  with  buildings,  or  with  unduly  high  buildings? 

10.  To  what  extent  would  the  untaxing  of  buildings  necessitate 
the  acquisition  by  the  city  of  additional  land  to  be  reserved  for  open 
spaces,  particularly  in  the  central  part  of  the  city? 

11.  To  what  extent  would  this  increased  expenditure  still  further 

augment  taxes?  r  .     -u- 

12.  To  what  extent,  if  any,  would  the  untaxing  of  buildings  in- 
crease the  necessity  for  building  restrictions,  such  as  limitation  of  the 
height  of  buildings,  limitation  of  proportion  of  lot  space  covered,  etc.? 
If  the  untaxing  of  buildings  is  desirable,  would  it  be  better  to  untax 
buildings  before  or  after  the  additional  legislation  referred  to  abov^ 

had  been  attained?  .         r  ,    -u- 

13.  To  what  extent,  if  any,  would  the  untaxing  of  buildings  tend 
to  discourage  the  acquiring  and  holding  of  large  lots  and  grounds  for 
lawn  or  garden  purposes  in  the  suburban  districts?     Would  this  be  a. 

good  or  a  bad  thing? 

14.  Would  the  untaxing  of  buildings  tend  to  change  in  any  respect 
the  internal  design  of  the  buildings,  for  example,  would  it  increase  the 
size  of  the  rooms  and  suites? 

129 


r 


« 


ic,  Assuming  that  the  untaxing  of  buildings  would  promote  the 
construction  of  larger  and  better  buildings,  with  «>o5,^,;°?'^°f;^^^ 
rooms,  would  this  have  the  eflfect  of  destroying  the  value  of  existmg 
buildings  by  rendering  them  obsolete? 

i6  Would  the  untaxing  of  buildings  tend  to  encourage  temporary 
or  ad  interim  improvements  pending  the  final  determination  of  the 
character  of  the  appropriate  improvement  for  a  given  location  and  pend- 
[ng"he  arrival  of  the  time  when  such  appropriate  improvements  can 

be  profitably  made?  . 

17.  Would  the  eflfect  upon  vacant  lands  suitable  for  truck  farms 
be  to  continue  them  in  use  for  this  purpose  longer  than  would  be  the 
case  under  the  present  system  of  taxation? 

18.  If  the  untaxing  of  buildings  would  decrease  the  value  of  lands 
in  the  outlying  districts,  would  this  cheapening  somewhat  offset  the 
lendencv  to  economize  in  the  use  of  land  for  lawn  and  garden  purposes 
which  r^ight  result  from  the  higher  rate  of  taxation  o     -d  ^^-J^J 
so   how  long  would  this  continue,  and  what  would  be  the  final  result. 

TO  What  are  the  criteria  for  determining  at  a  given  time  whether 
or  not 'a  city  is  overbuilt  with  respect  to  any  particular  class  of  build- 
ing?    What  is  the  influence  of  the  loan  market  m  this  respect?     Is  it 

important?  _  ,,.,,.  :„ 

20.     To  what  extent  are  the  diflferent  classes  of  buildings  now  in 

existence  in  New  York  vacant? 

21  To  what  extent  are  the  buildings  now  vacant  really  suitable 
for  occupation?  In  other  words,  to  what  extent  are  the  vacancies 
ascribable  to  the  buildings  having  been  inappropriately  constructed  in 
the  first  place  or  having  become  obsolete? 

22  Are  the  modern  and  better  types  of  buildings  of  the  different 
classes  more  fully  occupied  than  the  older  and  inferior  tyjies?  Does 
the  erecdon  of  new  buildings  of  a  better  type  and  more  suitable  for  he 
purposes  for  which  they  are  designed  have  any  tendency  to  force  the 
destruction  of  older  and  less  suitable  buildings? 

27.  If  so  would  this  be  likely  to  result  in  a  material  increase  m 
the  cost  of  building,  by  reason  of  the  cost  of  labor  and  materials ;  and 
if  so.  at  what  point  would  the  tendency  to  stimulate  building  .Dperations 

check  itself? 

24  What  effect  would  the  untaxing  of  buildings  have  upon  such 
developments  as  the  Sage  Foundation  Homes  Company? 

2=;  What  effect  would  the  untaxing  of  buildings  have  upon  the 
necessity  for,  and  the  practicability  of,  city  plannmg  schemes  for  out- 
lying districts? 

26  To  what  extent  would  the  larger  supply  of  buildings  tend  to 
attract  population  to  New  York  City  or  to  cause  a  shifting  of  popula- 
tion from  one  section  to  another  in  New  York  City?  How  far  might 
this  tendency  go  to  offset  or  to  accentuate  the  effect  of  transit  facili- 
ties in  any  particular  locality? 

27.  If  the  untaxing  of  buildings  tended  to  greater  compactness 
in  the  development  of  the  city,  to  what  extent  would  this  render  the 
problem  of  street  transportation,  such  as  rapid  transit,  trolley,  and 
vehicular  traffic,  location  of  pipes,  wires,  conduits,  etc.,  more  or  less 
difficult  than  they  now  are? 

130 


Question  Series  3. 

ON  THE  EFFECT  OF  THE  UNTAXING  OF  BUILDINGS  UPON 

RENT. 

1.  To  what  extent  is  land  leased  in  New  York  City  on  the  basis 
of  pure  ground  rents  with  the  lessee  making  the  improvements? 

2.  To  what  extent  are  parcels  of  improved  real  estate  in  New 
York  City  leased  or  rented  as  a  whole? 

3.  What  are  the  usual  terms  of  building  leases  as  to  duration,  re- 
newal, liability  to  pay  rent,  improvements  and  maintenance,  payment 
of  taxes,  and  special  assessments? 

4.  To  what  extent  are  buildings  in  New  York  City  leased  or  rented 

piecemeal? 

5.  Where  different  tenants  occupy  as  lessees  separate  portions  of  a 
building  in  New  York  City,  what  are  the  usual  terms  of  the  leases  as 
to  improvements  and  maintenance? 

6.  Where  different  tenants  occupy  as  lessees  different  portions  of 
a  building  in  New  York  City,  what  are  the  usual  terms  of  the  leases 
with  reference  to  free  services  rendered  by  the  landlord,  such  as  jani- 
tor service,  elevator  service,  lighting,  heating,  etc.? 

7.  What  are  the  elements  that  go  to  make  up  rent  for  the  various 
types  of  buildings,  and  under  the  various  types  of  leases  in  use  in  New 

York  City? 

8.  Does  the  landlord  normally  collect  in  ground  rent  all  that  he 
can  get  or,  in  other  words,  all  that  anybody  is  willing  to  pay  for  the 
privilege  of  occupying  the  particular  location? 

9.  If  the  landlord  now  collects  in  ground  rent  all  that  the  location 
is  worth,  and  if  taxes  now  levied  on  buildings  were  transferred  to  the 
land,  would  the  landlord,  by  reason  of  the  increased  tax  on  the  land, 
be  unable  to  increase  the  ground  rent? 

10.  Are  the  taxes  now  levied  on  the  building  properly  regarded  as 
a  part  of  the  operating  expense  of  the  building  separate  from  the  land, 
or  do  they  come  out  of  the  landlord  as  a  deduction  from  ground  rent? 
In  other  words,  do  taxes  levied  upon  the  value  of  buildings  have  any  dif- 
ferent effect  upon  rents  than  do  taxes  levied  upon  the  value  of  land  ?  Do 
tenants  pay  any  higher  rents  on  account  of  a  high  tax  rate  on  land  and 
buildings,  or  either  of  them,  than  they  otherwise  would? 

11.  To  what  extent,  under  present  conditions,  do  owners  of  im- 
proved property  count  upon  the  appreciation  in  land  values  to  offset 
depreciation  in  building  values?  To  what  extent  are  rents  kept  down 
by  the  elimination  of  building  depreciation? 

12.  If  the  transfer  of  the  present  tax  on  buildings  to  land  values 
had  the  effect  of  checking  the  increase  in  land  values,  to  what  extent 
would  property  owners  be  compelled  to  increase  their  depreciation  re- 
serve on  account  of  their  buildings,  and  would  such  increase  in  deprecia- 
tion charge  be  added  to  rents? 

13.  If  the  untaxing  of  buildings  should  result  in  the  construction 
of  more  buildings  and  larger  and  more  commodious  ones,  would  the 
effect  be  through  competition  to  reduce  rents  in  all  buildings  or  only  in 
the  older,  smaller,  and  less  commodious  ones? 

14.  To  what  extent  would  lower  rents  due  to  a  larger  supply  of 
buildings  in  New  York  City  tend  to  attract  population  from  outside  the 
city,  particularly  from  suburbs  in  New  York  and  New  Jersey  to  which 

131 


people  doing  business  in  the  city  have  heretofore  gone  in  search  of  lower 
rents?  To  what  extent,  by  this  increase  in  the  demand  for  buildings, 
would  the  tendency  toward  lower  rents  be  checked?  w     ,u 

ic  If  the  effect  of  untaxing  buildings  would  be  to  stimulate  the 
construction  of  buildings,  and  thereby  through  competition  to  reduce 
the  rental  per  unit  of  space  occupied,  to  what  extent  would  the  renters 
take  larger  accommodations  for  the  same  money  rather  than  occupy 
the  same  accommodations  for  less  money?  ,       .       • 

i6  If  the  untaxing  of  buildings  would  lead  to  a  reduction  in  rents, 
could  the  reduction  in  rents  ever  be  greater  than  the  amount  of  the  tax 

so  transferred?     If  so,  why?  ^  .i     u       c^ 

17  Would  the  assumed  tendency  to  shift  to  the  tenant  the  beneht 
of  the  lower  tax  on  buildings  meet,  under  the  actual  conditions  in  New 
York  City,  with  friction?  i.  e.,  are  there  any  peculiar  conditions  con- 
nected with  the  mobility  of  the  population  which  would  interfere  with 
this  assumed  reduction  of  rents?  •     xt        ^    i 

i8  What  is  the  connection  between  rents  and  wages  in  New  York 
City^  Are  wages  higher  in  New  York  than  in  other  cities?  If  so,  why? 
If  one  of  the  causes  of  high  wages  in  New  York  is  higher  rents,  would 
a  decrease  in  rents  mean  a  fall  in  wages?    If  not,  why  not? 

IQ  In  general,  are  high  rents  in  New  York  due  more  largely  to 
high  land  values  or  to  other  causes?  What  is  the  relative  influence  of 
taxes  upon  rents  as  compared  with  other  factors  that  cause  high  rents? 

20  To  the  extent  that  taxes  form  an  element  in  rents  do  tenants, 
at  the  present  time,  in  New  York  City,  feel  that  they  are  interested  in 
the  city  budget,  that  is,  in  the  city  expenditures  which  result  m  city 
taxes  ^  If  it  be  assumed  that  the  benefit  of  the  untaxing  of  build mgs 
would  accrue  to  the  tenants,  would  this  not  mean  a  lessening  of  interest 
in  the  budget  of  the  great  mass  of  tenants?  Would  this  fact  accentuate 
the  tendency  to  have  all  the  taxes  paid  by  one  class  of  the  population 
and  to  have  the  expenditures  voted  by  another  ^  Is  this  a  healthy  ten- 
dency in  a  Democracy? 

Question  Series  4. 

ON  THE  EFFECT  OF  THE  UNTAXING  OF  BUILDINGS  UPON 

PUBLIC  REVENUE  AND  PUBLIC  CREDIT. 

1.  Would  the  transfer  of  the  tax  now  tevied  upon  improvements 
to  land  values  so  increase  the  tax  rate  as  to  make  the  taxes  levied  un- 
collectible? ,  ,       .         J 

2.  Would  the  revenue  from  the  land  tax  be  reduced  by  the  reduc- 
tion in  the  value  of  the  land  and  the  resultant  reduction  in  the  assess- 
ment or  tax  base?  . 

3.  Would  the  transfer  of  the  building  tax  to  land  result  practically 
in  the  over-assessment  of  land,  either  through  the  reduction  of  existing 
land  values  or  through  the  increase  of  assessments  for  the  purpose  of 

keeping  down  the  tax  rate?  r  ,      1    1      ^        .  u    -li- 

4.  What  is  the  proportion  of  true  value  of  both  land  and  buildings 
carried  on  the  assessment  rolls  for  New  York  City,  as  a  whole,  and 
for  different  portions  of  the  city?  .,     ,       , 

5.  To  what  extent  do  assessments  necessarily  or  actually  lag  be- 
hind the  increase  or  decrease  of  values? 

132 


6     To  what  extent  are  buildings  in  New  York  City  depreciated  be- 
low the  cost  of  reproduction  now  in  the  assessments? 

7.     To  what  extent  do  the  assessments  in  New  York  City  reach 

speculative  values?  .      ,     ,      ,.  1^  •     4.u« 

8  If  the  increase  in  the  tax  rate  on  land  should  result  in  the 
curtailment  of  speculation  and  the  partial  or  complete  elimination  ot 
speculative  values,  would  this  necessarily  result  in  lower  assessments . 
What  distinction,  if  any,  is  there  between  assessed  valuation  and  sell- 
ing valuation  for  speculative  purposes?  .  xr  v  1 
Q  What  proportion  of  taxes  levied  on  real  estate  in  New  York 
City  remains  uncollected  at  the  close  of  the  tax  year?  At  the  close  of 
the  second  year?  At  the  close  of  the  third  year?  At  the  close  of  the 
fourth  year?    At  the  close  of  the  fifth  year? 

10  Assuming  that  the  untaxing  of  buildings  would  lead  to  over- 
assessment  of  old  values,  what  effect,  if  any,  would  such  over-assess- 
ment have  upon  the  sale  of  city  bonds  within  a  debt  limit? 

ii  Assuming  that  buildings  continue  to  be  taxed  on  an  assess- 
ment representing  1%  of  their  real  value,  would,  in  your  opinion,  the 
courts  hold  that  it  was  proper  to  include  the  other  99%  within  the 
valuation  of  real  estate,  or  would  the  courts  hold  that  only  1%  should 
be  so  included;  and  what  would  be  the  effect,  both  upon  the  constitu- 
tional tax  rate  and  upon  the  constitutional  debt  limit? 

12  If  buildings  were  untaxed,  would  this  tend  in  any  way  to 
remove  the  objections  that  now  lie  against  the  taxing  of  exempt  prop- 
erty such  as  churches,  etc.?  .,     .,j-  u  1*  • 

13  If  it  be  assumed  that  the  untaxing  of  buildings  would  result  in 
a  more  compact  development  of  the  city,  to  what  extent  would  this 
affect  the  cost  of  government  functions  and  thereby  increase  or  de- 
crease the  amount  of  credit  or  current  revenue  necessary  for  city  gov- 

14  If  it  be  assumed  that  the  untaxing  of  buildings  would  result 
in  a  more  intensive  use  of  the  land  and  in  the  consequent  necessity  of 
more  parks,  open  spaces,  wider  streets,  etc.,  to  what  extent  would  this 
increase  or  decrease  the  amount  of  credit  or  of  current  revenue  neces- 
sary for  the  city  government?  r    ^.       -. 

15  In  general,  would  the  more  compact  development  ot  the  city 
mean  more  expenditure  or  less,  that  is,  higher  taxes  or  lower  taxes? 

16.  In  case  the  untaxing  of  buildings  resulted  in  a  shifting  of  real 
estate  development  accompanied  by  a  shifting  of  population  and  busi- 
ness, to  what  extent  would  these  changes  render  existing  municipal 
buildings  obsolete? 

17.  If  the  untaxing  of  buildings  resulted  in  a  shrinking  and  partial 
confiscation  of  land  values,  to  what  extent,  if  any,  would  the  deliberate 
adoption  of  this  policy  by  the  City  of  New  York  tend  to  affect  the  city  s 
business  relations  and  actual  borrowing  ability? 

18.  If  all  existing  taxes  on  buildings  were  transferred  to  land 
values,  would  this  tend  to  diminish  or  to  accentuate  the  evil  effects  and 
unpopularity  of  an  increasing  tax  rate? 

19.  If  all  taxes  on  buildings  were  transferred  to  land  values  would 
this  remove  a  practical  obstacle  in  the  way  of  a  full  development  of  the 
single  tax  theory  which  would  result  in  the  gradual  diminution  and  ul- 
timate absorption  of  a  larger  and  larger  proportion  of  ground  rent  in 
the  form  of  taxes? 

1^3 


m 


'V  I 


Question  Series  5. 

ON  THE  EFFECT   OF   THE   UNTAXING   OF   BUILDINGS 

UPON  MORTGAGE  LOANS. 

1.  To  what  extent,  if  any,  would  the  untaxing  of  buildings  reduce 
the  security  value  of  a  parcel  of  land  appropriately  improved? 

2.  To  what  extent,  if  any,  would  the  untaxing  of  buildings  reduce 
the  security  value  of  a  parcel  of  land  partially  or  inappropriately  im- 
proved ? 

3.  To  what  extent,  if  any,  would  the  untaxing  of  buildings  reduce 
the  security  value  of  unimproved  land? 

4.  What  proportion  of  improved  land  in  New  York  City  is  cov- 
ered by  first  mortgages?  What  proportion  by  second  mortgages?  What 
proportion  by  third  mortgages? 

5.  Up  to  what  proportion  of  full  market  value  will  money  be  loaned 
on  the  security  of  first  mortgages  in  the  case  of  fully  improved  land 
in  New  York  City? 

6.  Up  to  what  proportion  of  full  market  value  will  money  be 
loaned  on  the  security  of  first  mortgages  in  the  case  of  partially  or  in- 
appropriately improved  land  in  New  York  City? 

7.  Up  to  what  proportion  of  full  market  value  will  money  be  loaned 
on  the  security  of  first  mortgages  in  the  case  of  unimproved  land  in  New 
York  City. 

8.  Up  to  what  proportion  of  full  market  value  will  money  be  loaned 
on  the  security  of  second  mortgages  in  the  case  of  fully  improved  land 
in  New  York  City? 

9.  Up  to  what  proportion  of  full  market  value  will  money  be  loaned 
on  the  security  of  second  mortgages  in  the  case  of  partially  or  inap- 
propriately improved  land  in  New  York  City? 

10.  Up  to  what  proportion  of  full  market  value  will  money  be  loaned 
on  the  security  of  second  mortgages  in  the  case  of  unimproved  land  in 
New  York  City? 

11.  As  to  what  proportion  of  lands  in  New  York  City  subject  to 
mortgage  do  the  owners  hold  an  equity  of  less  than  ten  per  cent,  of 
full  market  value?  Of  less  than  twenty  per  cent.?  Of  less  than  thirty 
per  cent.?    Of  less  than  forty  per  cent.?    Of  less  than  fifty  per  cent.? 

12.  In  case  the  untaxing  of  buildings  resulted  in  reducing  the 
relative  proportion  of  land  value  to  total  value  of  real  estate,  to  what 
extent  would  this  tend  to  reduce  the  borrowing  power  of  the  property? 

13.  In  case  the  untaxing  of  buildings  should  result  in  a  decrease 
of  ten  per  cent,  in  the  total  value  of  real  estate,  to  what  extent  would 
equities  be  wiped  out  and  existing  mortgages  have  to  be  foreclosed? 

14.  If  the  untaxing  of  buildings  resulted  in  a  readjustment  of  rela- 
tive values  as  between  land  and  buildings,  and  if  this  resulted  in  a  re- 
duction of  the  security  value  of  improved  real  estate,  would  the  ultimate 
effect  be  to  decrease  the  size  of  loans  obtainable  on  mortgage,  or  to  in- 
crease the  rate  of  interest  demanded  and  paid? 


134 


ANSWERS  TO   QUESTIONS  SUBMITTED   BY   THE  SOCIETY 

TO  LOWER  RENTS  AND  REDUCE  TAXES  ON  HOMES; 

BENJAMIN  C.  MARSH,  EXECUTIVE  SECRETARY.* 


SERIES    I. 

On  the  Effect  of  the  Untaxing  of  Buildings  Upon  Land  Values  and 

Upon  Speculation  In  Land. 

1  (a)      The  development  of  the  selling  price  of  land  has  been 
irregular  in  New  York  Ci'y  to  the  extent  that  it  has  been  affected  by 

^'^  ^^'^onsilcS^^^  office  buildings  and  overcrowding  of  tene- 

ments.  .         ,  •.  r  „„ 

2  Projection  or  construction  of  transit  lines 

,:     Construction  of  public  improvements,  docks    piers   etc. 

4.    Construction  of  arterial  lines  of  communication  and  to  a  lesser 

extent  of  smaller  roads. 

e.     Location  of  settlements,  such  as  of  negroes^ 

6  Location  of  nuisances,  such  as  gas  plants  and  slaughter  houses. 

7  Shifting  of  business  and  mercantile  interests. 

8.     Heavy  discounting  of  the  demand  for  land  and  consequent  high 

^'""J"^  Reduction  of  local  demand  for  land  by  construction  of  bridges 

and  tT^"^it^^^|-^^^^  ^^^^  decreases  in  land  values  frequently,  due  to 
the  reasons  enumerated  above,  in  many  sections  of  the  city.  Particularly 
where  the  land  has  attained  a  capitalized  congestion  selhng  price.  The 
decrease  in  one  section  of  the  city,  however,  has  usually  resulted  m  an 
increase  in  another,-so  that  it  has  really  meant  merely  a  shifting  or 

'""^NoiV-^t1sirentra°'t!r"d1frerentiate  between  "selling  price  of 
land"  and  "land  values."  Were  government  to  take  all  the  ground  ^ent 
of  the  city  for  public  purposes-which  we  do  not  advocate-the  use 
value  of  the  land  would  not  be  reduced  at  all,  although  it  would  not 

have  any  selling  price.  •   ^      r     •         4.u^ 

2  This  question  must  be  considered  from  two  pomts  of  view ,  the 
selling  price  of  all  the  land  of  the  city,  and  the  selhng  price  of  indi- 
vidual parcels  of  land.  .  r  ,  j  r  ^.u  -^  ;n  a^ 
(a)  The  increase  in  the  selhng  price  of  land  of  the  city  will  de- 
pend chiefly  upon  the  tax  rate  on  land  values.  The  increase  of  land 
values  in  the  city  will  depend  solely  upon  the  increase  in  the  demand 

♦In  these  and  the  other  sets  of  answers  the  numbers  refer  to  the  numbers  of 
the  questions  in  the  preceding  questionnaire  to  which  the  answers  are  directed. 

135 


I 


I 


for  land  and  expenditures  for  public  improvements,  regardless  of  the 
system  of  taxation. 

(b).  The  increase  in  the  selling  price  of  parcels  of  land  in  the  City 
will  depend  upon  the  conditions  enumerated  in  answers  to  question  i 
(a). 

The  new  subway  will  probably  increase  the  selling  price  of  land 
affected  in  the  outlying  Boroughs  and  the  lower  west  side ;  it  will  prob- 
ably reduce  slightly  the  selling  price  of  land  in  some  sections  of  the 
City,  as  along  Lexington  Avenue,  by  enabling  people  to  reach  pleasanter 
surroundings  in  less  time. 

The  increase  in  selling  price  of  most  land  which  will  be  affected 
by  the  new  subway  system  does  not  seem  to  have  been  materially  dis- 
counted, though  much  of  this  land  is  held  at  a  very  high  figure. 

3.  The  answer  to  this  question  depends  upon  the  definition  of  **an 
appropriate  improvement."  If  that  definition  is  an  improvement  worth 
two  or  three  times  as  much  as  the  value  of  the  land,  then  only  a  very 
small  proportion  of  the  parcels  in  any  Borough  of  the  City  are  ade- 
quately improved. 

There  were  in  Manhattan,  in  1914,  7,202  absolutely  vacant  parcels 
of  land  assessed  for  $158,681,830,  and  comprising  approximately  9,000 
vacant  lots,  while  in  1912,  there  were  about  19,000  parcels  which  had 
one,  two  or  at  most  three-story  improvements. 

In  1910,  fifty  per  cent,  of  the  population  of  The  Bronx  lived  on  five 
per  cent,  of  the  area. 

In  the  Borough  of  Brooklyn,  only  about  one-half  of  the  area  is 
adequately  improved  with  buildings;  while  Queens  and  Richmond  are 
practically  agricultural  boroughs,  less  than  a  quarter  of  either  being  im- 
proved with  buildings.  Whether  buildings  be  untaxed  or  not,  large  areas 
in  both  these  boroughs,  whose  combined  acreage  is  nearly  111,000  acres, 
could  profitably  be  used  for  many  years  to  come  for  intensive  garden- 
ing, which  is  now  being  carried  on  profitably  in  both  boroughs.  A 
large  proportion  of  both  boroughs  is  assessed  as  acreage.  The  result 
of  heavy  taxation  of  land  values  would  not  be  to  compel  construction  of 
tenements  or  even  of  single  family  houses  on  every  lot  in  the  greater 
city  before  1926;  but  to  compel  owners  to  sell  at  reasonable  prices,  to 
use  their  land  productively  for  intensive  gardening  or  small  homes,  and 
to  return  to  the  community  a  larger  part  of  the  ground  rent,  due  to  pub- 
lic expenditures. 

The  "appropriateness"  of  an  improvement  does  not  depend  upon 
its  size.  The  City  Investing  Building,  Woolworth  and  Equitable  Build- 
ings are  monstrosities,  due  to  greed  to  corner  the  office  market  and  the 
craze  for  advertising,  but  primarily  to  the  moral  anarchy  of  land  specu- 
lators, and  their  control  over  the  Board  of  Estimate  and  Apportionment, 
and  the  Board  of  Aldermen,  as  these  bodies  could,  at  any  time,  have 
put  reasonable  limits  upon  the  height  or  size  of  all  buildings,  except 
possible  tenements.  Many  of  the  larger  office  buildings  of  the  city  rob 
the  neighboring  properties  of  light.  This  is  legal  in  the  United  States, 
but  prevented  by  the  "law  of  ancient  lights"  in  England. 

4.  No.  The  selling  price  of  land  is  its  clear  net  rental  capitalized, 
regardless  of  the  value  of  improvements  thereon. 

5.  The  life  of  an  ordinary  brick  tenement  or  house  is  twenty  to 
forty  years,  but  there  are  thousands  of  such  buildings  in  the  city  which 
have  been  "dead"  for  many  years.  Many  office  buildings  outlive  their 
usefulness  in  twenty  to  thirty  years. 

186 


6.  The  law  requires  land  to  be  assessed  for  what  it  will  bring  in  the 
open  market  at  a  free,  not  a  forced  sale.  For  many  years  the  Tax  De- 
partment has  sought  legislation  to  compel  the  true  price  paid  to  be  re- 
corded to  facilitate  the  very  difficult  task  of  assessment,  but  land  specu- 
lators, fearing  a  just  assessment,  have  defeated  the  effort.  The  net 
ground  rental  is  the  usual  determinant  of  the  selling  price,  and  pros- 
pective use  plays  a  part  in  fixing  the  net  ground  rental. 

7.  No  statistics  available,  probably  several  thousand  in  the  city. 

8.  The  value  of  movable  property  is  relative  with  respect  to  time 
and  place.  A  railroad  bond,  payable  at  a  remote  date,  changes  in  value 
as  the  prevailing  rate  of  interest  changes  and  its  value  changes  on 
account  of  its  location,  because  of  the  rate  of  exchange  between  two 
places,  such  as  London  and  New  York,  and  because  of  particular  bur- 
dens, such  as  taxes  to  which  its  ownership  may  subject  its  owner  in 
a  particular  place. 

A  parcel  of  land  cannot  be  moved  away,  and,  therefore,  it  does 
not  change  its  value  because  of  its  location,  but  it  does  change  from  time 
to  time  because  of  a  change  in  the  circumstances  affecting  its  value.  One 
reason  for  increase  in  value  is  because  of  the  parcel's  peculiar  adapta- 
bility for  a  particular  use.  For  instance  on  the  upper  east  side,  at  the 
intersection  of  a  cross  street  with  an  avenue,  three  of  the  corners  are 
owned  by  an  estate  which  will  not  lease  its  property  for  the  sale  of 
liquor.  The  fourth  corner  is  said  to  rent  for  twice  as  much  as  any  ont 
of  the  three  corners.  There  can  be  only  one  saloon  at  the  intersection 
and  this  gives  a  certain  limited  monopoly  to  the  corner  that  can  be 
leased  for  liquor  selling. 

Another  reason  for  an  enhanced  value  is  the  hope  that  there  will 
be  an  increased  demand  for  it  at  some  later  period.  All  of  the  circum- 
stances which  indicate  an  increased  demand  for  a  particular  parcel  of 
land  have  a  tendency  to  increase  its  value. 

A  rule  in  the  Department  of  Taxes  assessing  unimproved  land  at 
a  third  of  its  value  and  improved  land  at  two-thirds  of  its  value  tends 
to  increase  the  value  of  unimproved  land,  to  encourage  speculation  by 
owning  unimproved  land  and  holding  it  out  of  use.  This  used  to  be  the 
rule  in  New  York  City.  A  rule  which  assesses  all  land — improved  and 
unimproved — at  full  value  tends  to  decrease  the  value  of  unimproved 
land  relatively  to  what  it  was  before  the  law  was  observed.  A  change 
in  the  law  placing  all  taxes  on  land,  without  regard  to  improvements, 
would  tend  to  decrease  the  value  of  unimproved  land,  and  would  en- 
courage improvement — just  the  contrary  of  the  situation  as  it  existed 
under  the  old  rule  of  the  Department  of  Taxes  to  discriminate  in  favor 
of  unimproved  land  and  against  improved  land.  It  is  difficult  to  see 
how  there  could  be  a  great  increase  of  population  without  an  increase  of 
the  community's  wealth. 

All  increase  of  population  comes  from  increased  business  facilities 
and  business  opportunities,  which  imply  an  increase  in  the  capital  in- 
vested. It  is  difficult  to  see  how  the  private  income  of  a  particular 
tenant  would  increase  the  rent  of  the  parcel  of  land  which  he  occupied. 

Public  improvements  for  which  the  people  pay  are  an  important 
factor  in  increasing  land  values. 

9.  If  it  were  known  that  the  population  of  the  city,  as  a  whole, 
would  remain  stationary,  it  might  slightly  depress  the  aggregate  selling 
price  of  land  in  the  city,  if  other  factors  remain  constant.    When  values 

137 


I 


• ) 


in  ' 


l> 


t!H 


are  going  up,  or  when  the  prevailing  rate  of  interest  is  declining,  the 
price  at  which  a  security  sells  includes  an  allowance  for  expectation  of 
a  rise. 

ID.  Probably  the  estimated  immediate  future  growth  of  popula- 
tion for  a  year  or  two  is  reflected  pretty  accurately  in  present  land 

values. 

11.  We  assume  that  in  the  question,  "what  is  better  for  a  great 
city,  high  land  values  or  how  land  values?"  selling  price  is  meant,  and 
high  means  above  the  real  value,  and  low  means  below  the  re.il  value. 
It  is  not  good  for  a  community  to  put  an  exaggerated  value  on  anything. 
We  refer  the  Committee  to  the  statement  of  Mr.  Richard  M.  Hurd,  that 
low  land  values  are  good  for  a  community  because  then  their  ground 
rents  are  low.  The  value  of  land  is  not  the  important  point,  but  the 
selling  price. 

12.  The  Real  Estate  Record  and  Builders'  (iuide  stated  editorially 
a  few  years  ago:  "New  York  City,  probably  more  than  any  other  city 
in  the  world,  has  been  the  paradise  of  the  real  estate  speculators  and 
operators,  of  the  man  who  buys  real  estate,  not  for  the  purpose  of  im- 
proving it,  but  for  the  purpose  of  appropriating  a  probable  increase  in 

value." 

The  question  is  misleading  since  it  dififerentiates  between  purchasing 
land  "for  the  purpose  of  investment"  and  "for  the  purpose  of  resale  at 
a  profit."  Most  of  the  large  land-holding  companies  and  estates  buy 
land  for  speculation, — probably,  at  least,  a  quarter  to  a  third  of  the 
value  of  land  is  so  held,  and  a  third  to  half  of  the  area  in  the  outlying 
boroughs. 

13.  Yes.  Land  speculation  would  be  discouraged,  but  not  stopped 
till  all  the  ground  rent  is  taken  by  taxation.  Transferring  taxes  now 
levied  on  buildings  to  land  values,  during  a  period  of  five  to  ten  years, 
would  depreciate  the  selling  price  of.  land  (the  present  assessed  value) 
but  would  retard  the  rate  of  increase. 

If  all  taxes  upon  buildings  were  transferred  to  the  land,  it  would 
discourage  the  holding  of  land  out  of  use,  because  of  the  increased  car- 
rying charges.  Untaxing  buildings  would  encourage  the  erection  of  build- 
ings by  decreasing  the  carrying  charges  of  the  investment  in  the  building. 
In  a  growing  community,  untaxing  buildings  should  have  the  effect  of 
lowering  rents,  through  the  operation  of  the  law  of  supply  and  demand. 

The  average  annual  increase  in  the  tax  rate  on  both  land  and  build- 
ings in  1908,  1909-1910  was  nine  cents  on  $100,  but  during  these  three 
years  the  increase  in  the  selling  price  of  land  was  about  $400,000,000; 
the  increase  in  the  assessed  value  was  much  larger. 

Transferring  taxes  now  levied  on  buildings  to  land  values,  gradual- 
ly, through  a  period  of  ten  years,  would  involve  an  increase  in  the  tax 
rate  on  land  alone  of  only  about  eleven  cents  on  $100,  while  the  stimulus 
to  manufacturing  would  tend  to  keep  the  selling  price  of  land  stable, 

14.  The  social  and  economic  effect  would  be  to  decrease  the  cost 
of  living,  to  improve  the  housing  and  working  conditions,  to  increase 
the  purchasing  value  of  wages,  and  to  provide  more  employment  and 
better  wages.  Whether  this  would  be  considered  more  employment  or 
otherwise,  depends  upon  whether  it  is  good  for  the  laboring  man  to  be 
well  paid,  to  live  and  work  under  safe  and  healthy  surroundings,  or  in 
dangerous,  unhealthy  surroundings.  Some  people  think  it  is  bad  for  the 
laboring  man  to  have  high  wages.    We  do  not  so  believe. 

138 


The  city  would  also  acquire  land  cheaper  for  public  purposes. 

15.  The  advantages  and  disadvantages  of  land  speculation  are  no 
different  from  the  advantages  and  disadvantages  of  speculation  in  gen- 
eral, so  far  as  the  speculator  is  concerned.  The  effect  on  the  community, 
however,  is  different.  In  so  far  as  land  speculaton  holds  land  out  of  use, 
it  gives  an  artificial  value  to  land  in  use,  increases  rents  and  the  cost 
of  living — to  the  disadvantage  of  all  of  the  community  except  the  land 
owner.  The  users  of  land  have  to  pay  ground  rent  on  land  speculators* 
profits — users  of  other  commodities  speculated  in    do  not. 

16.  When  population  is  so  congested  as  to  increase  illness  and  to 
create  immoral  and  indecent  conditions,  we  may  be  sure  that  some  un- 
improved land  is  ripe  for  improvement,  although  increased  transporta- 
tion facilities,  sewers,  streets,  fire  houses,  sidewalks,  pavings,  poHce  sta- 
tions and  many  other  requirements  may  be  necessary  as  a  part  of  the 
improvement.  From  the  point  of  view  of  the  owner  of  a  lot,  his  lot  it 
not  ripe  for  improvement  until  the  city  has  spent  a  great  deal  of  money 
in  its  neighborhood.  From  the  point  of  view  of  the  public,  a  tract  of 
land  is  ripe  for  improvement  when  there  is  a  reasonable  demand  for  the 
land.  This  calls  for  the  necessary  money  to  be  spent  by  the  public  and 
the  owner  in  fitting  it  for  the  uses  of  which  the  population  has  need.  No 
one  can  say,  statistically,  to  what  extent  unimproved  land  in  New  York 
is  ripe  for  improvement,  but  obviously  a  good  deal  is — the  amount  will 
be  determined  when  taxes  now  levied  on  buildings  to  prevent  their  con- 
struction is  transferred  to  land  values. 

17.  A  land  increment  tax  which  would  take  all  of  the  increment 
would  have  considerable  effect  in  stabilizing  values  and  checking  specu- 
lation, but  it  would  be  a  gross  discrimination  in  favor  of  those  who  have 
profited  by  land  speculation  to  date,  and  would  not  be  either  a  sound 
fiscal  nor  economic  policy.  By  reducing  the  general  tax  rate,  it  would 
also  add  to  the  acquired  profits  of  land  speculation.  A  very  low  land 
increment  tax  would  have  negligible  economic  results  and  would  yield 
little  revenue. 

18.  The  transfer  of  the  tax  from  buildings  to  land,  while  at  once 
depreciating  land  values,  ought  to  tend  to  counteract  some  of  the  factors 
tending  to  make  its  value  shrink.  The  lowering  of  rents  ought  to  tem- 
porarily attract  an  increased  population.  If  business  can  be  sure  of 
not  being  taxed  business  should  be  attracted. 

Land  in  New  York  City  has  borne  heavier  burdens  than  almost 
anywhere  else,  and  still  the  selling  price  of  land  has  increased  enor- 
mously. 

19.  Untaxing  buildings  and  putting  an  increased  tax  burden  on 
land  values  ought  to  help  loans  on  real  estate,  because  such  a  policy 
would  tend  to  increase  the  population,  assuming,  of  course,  that  the 
money  raised  from  taxes  was  spent  with  reasonable  efficiency  for  the 
benefit  of  the  land. 

The  tax  upon  buildings  has  exactly  the  opposite  effect  upon  land 
values  from  a  tax  upon  land  values.  Assuming  a  stationary  population 
and  no  other  factors  tending  to  increase  land  values  (an  assumption 
always  hitherto  contrary  to  fact  in  New  York  City)  a  higher  tax  rate 
upon  land  values  would  depreciate  the  selling  price  of  land,  regardless 
of  the  value  of  the  improvement  thereon. 

20.  Exact  figures  cannot  be  obtained  because  so  much  land  is  held 
by  dummies,  and  because  the  true  owners  of  all  property  are  not  re- 

139 


9 


i 


j 


il 


corded.  Property  owners  are  averse  to  having  the  ownership  of  prop- 
erty here  known.  This  society  will  shortly  submit  a  list  of  the  largest 
owners  of  property  and  the  amounts,  showing  that  about  one  thousand 
families  are  the  owners  of  record  or  control  corporations  owning  be- 
tween a  fourth  and  a  fifth  of  the  total  value  of  land  in  the  city.  The 
ownership  of  land  should  have  been  obtained  by  the  Tax  Committee 
itself.  To  fail  to  do  so  would  be  proof  that  the  Committee  had  no  mten- 
tion  of  ascertaining  facts  essential  to  determine  the  results  of  transfer 
ring  of  taxes  now  levied  on  buildings  to  land  values.  There  may  be  as 
many  as  150,000  owners  of  property  in  New  York  City. 

Much  property  is  owned  by  absent  landlords.  The  study  of  this 
Society  indicates  that  about  two  thousand  families,  and  a  few  real  estate 
corporations  which  they  control,  own  more  than  half  of  the  value  of  land 
in  the  city.  The  vast  majority  of  the  property  owners  of  the  city  do  not 
own  more  than  $800  to  $1,500  worth  of  land. 

21.  Most  mortgages  are  owned  by  small  investors  through  life  in- 
surance companies,  savings  banks  and  other  financial  institutions,  which 
loan  on  real  estate.  Unless  these  institutions  have  loaned  much  more 
than  the  law  allows  on  property  the  savings  would  not  be  affected  by  the 
transfer  of  taxes  on  buildings  to  land  values  in  one  year.  These  sav- 
ings are  perfectly  safe  if  the  transfer  is  made  in  not  less  than  five  years, 
as  the  average  loan  is  for  three  years  and  very  few  exceed  five,  while 
the  change  would  not  reduce  the  selling  price  of  land  so  would  not  im- 
pair the  value  of  the  security. 

22.  It  would  decrease  the  taxes  paid  by  the  owners  of  skyscrapers, 
but  not  an  owner  of  a  skyscraper  wants  the  change  because  he  knows 
he  would  be  obliged  through  the  competition  of  new  buildings  to  reduce 
his  rents  by  at  least  as  much  as  the  reduction  in  his  taxes.  The  change 
would  increase  the  total  taxes  paid  by  the  ''skyscraper"  district  below 
Chambers  Street  in  Manhattan   nearly  a  million  and  a  half. 

23.  There  are  practically  no  small  house  owners  in  Manhattan  like 
those  in  Brooklyn.  The  land  of  the  small  house  owners  in  Brooklyn 
is  assessed  for  $1,000  and  $2,000,  of  the  "small"  house  owners  in  Man- 
hattan from  $5,000  to  $10,000.  Most  "small"  house  owners  in  Manhat- 
tan would  realize  from  $2,000  to  $5,000  unearned  land  increment  on  the 
sale  of  their  property  if  they  have  held  it  for  any  length  of  time.  A  largt 
proportion  of  them  would  pay  about  the  same  taxes,  under  the  proposed 
change,  or  slightly  more  because  of  their  unearned  increment ;  while  the 
small  house  owner  in  Brooklyn  would  save  on  the  average  $40  to  $75 
a  year  in  taxes. 

24.  The  effect  depends  upon  the  relative  assessed  value  of  land  and 
improvements  of  each  parcel  in  every  borough. 

25.  The  effect  depends  upon  the  relative  assessed  value  of  land 
and  improvements,  but,  in  general,  and  with  practically  no  exceptions, 
the  relatively  modest  owners  of  each  class  of  owners  of  buildings,  whose 
buildings  are  buildings  and  not  taxpayers,  fire-traps  nor  consumption 
factories,  would  save  taxes,  while  the  wealthier  members  in  each  class 
would  pay  more  taxes. 

The  Tax  Committee  must  be  aware  of  the  fact  that  nearly  three 
million  people  live  in  firetrap  tenements,  and  hundreds  of  thousands  in 
consumption  factories. 

26.  To  the  extent  that  the  relative  assessed  values  of  land  and  im- 
provements are  known,  and  the  development  of  the  city  and  the  influ- 

140 


ence  of  countless  forces  can  be  predetermined.  The  tendencies  are 
known,  and  will  be  beneficial  to  all  except  land  speculators,  and  finan- 
cial interests  because  speculative  selling  prices  of  land  increase  interest 
rates. 


SERIES    2. 

On  the  Effect  of  the  Untaxing  of  Buildings  Upon  Building  Operations, 

Housing  Conditions  and  Congestion. 

1.  Yes,  as  admitted  by  most  who  oppose  the  change  and  whose  op- 
position would  otherwise  be  largely  illogical.  It  will  enable  builders 
to  secure  land  for  a  lower  price  than  with  the  present  tax  rate  on  land 
values  and  reduce  the  fixed  charges  on  adequately  improved  property 
also  by  reducing  the  total  taxes.  People  construct  buildings  tor  the 
profit  they  can  get,  and  not  for  their  health.  The  owners  of  unimproved 
and  underimproved  property  will  be  obHged  to  choose  between  a  larger 
net  loss  and  a  smaller  net  profit.    The  change  would  also  tend  to  lower 

interest  rates.  .         . 

2.  Yes.     For  the  same  reasons  as  given  in  i,  above. 

3.  Yes.     For  the  same  reasons  as  given  above. 

4.  No,  because  land  is  now  used  as  intensively  as  possible  by  a 
few  under  our  present  uniform  tax  rate  on  land  and  buildings. 

By  putting  heavier  carrying  charges  on  vacant  or  underimproved 
land  it  would  force  the  owners  thereof  in  self-preservation  to  favor  ra- 
tional limitations  on  the  volume  of  buildings  so  a  few  land  hogs  couldn  t 
corner  the  office  space  market.  The  realty  interests  have,  for  years,  pre- 
vented any  Hmitation  upon  the  volume  or  size  of  office  buildings  and 
prevented  the  Board  of  Estimate  and  Apportionment  and  the  Board  ot 
Aldermen  from  limiting  the  same.  Realty  owners,  by  their  own  action, 
have  to  quote  Hon.  Lawson  Purdy,  "shot  land  values  to  pieces.  Except 
for  the  opposition  of  realty  owners,  a  districting  system  for  the  city 
would  doubtless  have  been  in  force  for  all  buildings. 

c;  Partly  answered  in  4,  above.  It  would  make  people  use  their 
brains,  instead  of  privilege,  to  get  a  living  everywhere  and  encourage 
consecutive  improvements. 

6  Most  land  speculators  say  in  the  same  breath  that  no  loans  can 
be  secured  for  constructing  buildings,  and  that  every  owner  of  land  will 
construct  immediately  a  huge  building.  Neither  statement  is  true  Own- 
ers of  land  will  improve  rationally  more  quickly.     (See  4,  above.) 

7  It  will  tend  to  cause  logical  and  consecutive  improvement  from 
the  center  out,  with  better  provision  for  light  and  ventilation,  and  open 
spaces,  because  with  a  good  supply  of  buildings  tenants  will  take  only 
the  better  ones,  just  as  the  owners  of  the  new  office  buildings  are  taking 
the  tenants  of  the  old  and  darker  ones  away  from  them.  It  will  tend 
to  prevent  straggling  development.  ^,      ,  .   ,  , 

8  It  will  have  the  reverse  tendency.  The  higher  tax  rate  on  the 
land  values  would  enable  the  city  to  acquire  land  for  open  spaces  cheaper, 
and  to  protect  the  need  of  the  workers,  instead  of  as  to  date,  encourag- 
ing the  greed  of  land  speculators.  ,         ^         .  . 

o  Not  at  all.  New  York  City  could  accommodate  five  times  its 
present  population,  with  a  density  of  less  than  250  to  the  acre,  while  we 
have  many  blocks  with  a  density  of  750  to  the  acre  now. 

141 


» 


I 


10.  New  York  City  never  acquires  public  necessities  on  the  basis 
of  need,  but  with  the  kind  permission  of  the  real  rulers  of  the  city — 
the  land  speculators  and  the  financial  interests.  The  proposed  change 
will  open  the  way  for  earlier  and  more  adequate  provision  of  public 
needs,  by  breaking  the  grip  of  these  two  classes  of  exploiters  upon  the 
conduct  of  the  city's  affairs. 

11.  Probably  only  slightly,  but  to  the  extent  it  did,  most  of  the 
revenue  would  be  secured  from  land  owners  for  whose  financial  bene- 
fit the  expenditures  are  made,  instead  of  as  now,  chiefly  out  of  the  wages 
of  the  workers. 

12.  Not  at  all,  as  experience  has  conclusively  shown.  It  would, 
as  pointed  out  above,  merely  make  such  police  regulation  easier  of  ac- 
compiishment.  It  would  be  better  to  begin  untaxing  buildings  first 
and  then  to  put  on  restrictions.  The  land  speculators  will  fight  both 
in  the  future,  as  hitherto  and  now. 

13.  Within  a  score  of  years,  there  will  probably  be  2,000,000  fam- 
ilies in  the  city.  Within  the  five  boroughs,  there  are  not  much  over 
100,000  acres  available  for  residential  purposes  or  counting  16  net  lots 
to  the  acre,  1,600,000  lots.  Obviously,  few  families  need  expect  perma- 
nently to  have  over  two  or  three  lots  apiece,  without  paying  a  little 
more  for  the  privilege,  which  cannot  be  enjoyed  by  many.  For  the  im- 
mediate future,  however,  the  proposed  change  would  make  the  acquisi- 
tion of  a  single  lot  or  two  small  lots  by  families  much  easier,  because  the 
owners  of  large  acreage  tracts,  in  all  the  boroughs  outside  of  Manhattan, 
would  sell  lots  much  cheaper  to  would-be  small  home  owners.  A  20  x 
loo-foot  lot  affords  opportunity  for  a  garden. 

14.  It  would  make  the  rents  for  better  apartments  and  more  rooms 
lower. 

15.  It  would  remove  the  present  premium  upon  every  old  and  un- 
healthy buildings  and  not  render  them  obsolete,  for  they  are  that  al- 
ready, but  would  make  them  unprofitable,  and  many  of  them  ought  to 
be  vacated  by  the  authorities  because  they  are  unfit  for  human  habita- 
tion or  occupancy  and  dangerous  to  life  and  health. 

16.  It  would  hasten  the  time  when  the  owners  would  improve 
land  adequately. 

17.  No.  The  Farmers'  Association  of  Queens  would  not  be  able 
to  hold  acreage  tracts  so  long  before  they  unload  them  at  city  lot  prices. 

18.  Yes.    Land  would  come  into  the  market  cheaper  and  quicker. 

19.  Whether  the  supply  of  buildings  is  restricted  by  taxes  in  re- 
straint of  their  construction.  The  loan  market  is  of  importance.  Pre- 
venting speculative  increases  in  the  selling  price  of  land  would  improve 

it. 

20.  Thousands  of  buildings  that  ought  to  be  vacated  are  largely 
tenanted  at  relatively  high  rentals.  We  have  20,000  new  cases  of  con- 
sumption annually. 

21.  To  a  small  extent.  Vacancies  are  largely  due  to  the  causes 
ascribed  in  the  question. 

22.  (a)  Yes,  in  newer  district  only. 

(b).     Yes,  and  the  proposed  change  will  accelerate  such  destruction. 

23.  Taking  ground  rents  instead  of  wages,  to  pay  the  cost  of  gov- 
ernment, reduces  the  cost  of  living  and  increases  the  purchasing  power 
of  wages.  It  is  real,  and  not  nominal,  wages  that  count.  The  supply 
of  buildings  will  not  be  too  great  for  many  years  to  come,  if  at  all. 

142 


24.  It  would  reduce  the  profits  from  land  speculation  they  now 
make  under  the  guise  of  "philanthropy." 

25.  It  should  precede  city  planning — to  make  city  planning  more 

effective. 

26.  As  soon  as  results  are  shown,  other  cities  and  states  will  be 

obliged  to  follow  this. 

27.  People,  not  buildings,  create  the  necessity  for  transit,  etc.,  and 
untaxing  buildings  will  not  increase  the  fecundity  of  women,  but  will 
tend  to  decrease  the  birth  rate  by  improving  economic  conditions.  Get- 
ting revenue  from  the  proper  source — ground  rents — will  make  it  easier 
for  the  city  to  provide  transit  and  galleries  for  substructures  as  will  also 
the  control  over  the  city's  development  be  facilitated  by  land  values  taxa- 
tion. Taking  the  profits  of  congestion  for  government  will  make  con- 
gestion less  sought  by  land  speculators. 


SERIES    3. 

On  the  Effect  of  the  Untaxing  of  Buildings  on  Rent. 

1.  Not  much.    It  is  the  custom  of  a  few  families. 

2.  No  figure  available.     Question  plainly  irrelevant. 

3.  On  business  properties  tenants  usually  make  all  repairs,  on 
tenement  and  other  residence  properties  landlords  usually  do  so.  The 
ground  lessee  usually  pays  the  taxes,  but  in  other  leases  the  landlord 
pays  the  taxes,  except  water  rates.    Assessments  are  usually  paid  by  the 

landlord. 

4.  Almost  entirely. 

5.  Landlords  usually  attend  to  both. 

6.  Except  lighting  and  frequently  heating,  all  usually  rendered  by 

landlord. 

7.  Landlords  try  to  include  interest  on  mortgage,  depreciation, 
taxes,  profits,  etc.,  and  then  get  what  they  can  under  the  law  of  sup- 
ply and  demand. 

8.  He  would  be  a  "philanthropist,"  not  a  landlord,  if  he  didn't. 

9.  Yes.    That  is  why  he  objects  to  the  transfer. 

10.  (a).    Taxes  on  buildings  are  properly  regarded  as  part  of  the 

operating  expenses. 

(b).  Yes,  taxes  on  rented  buildings  are  paid  by  tenants;  taxes  on 
land  values  come  out  of  unearned  profits  of  land  owners. 

(c).  Yes,  tenants  pay  higher  rents  on  account  of  a  high  tax  rate 
on  buildings,  because  that  limits  the  supply  of  buildings  and  gives  them 
a  scarcity  value.  A  high  tax  rate  on  land  values  would,  as  pointed  out 
above,  bring  land  into  the  market  earlier  and  cheaper  to  meet  increased 

carrying  charges. 

11.  Owners  of  most  buildings  include  depreciation  in  their  rent, 
under  the  present  tax  system,  and  take  the  appreciation  of  land  values 
as  "velvet."  Rents  are  not  kept  down  by  the  elimination  of  depreciation, 
but  by  the  number  of  "To  Let"  signs  in  desirable  quarters  competing  for 

tenants. 

12.  Property  owners  would  be  compelled  to  take  what  they  could 
get.  Depreciation  charges  would  not  be  affected  by  the  proposed  change 
and  couldn't  be  added  to  rent. 

13.  In  all  buildings. 

143 


I 


^ 


I 


i 


i 

ill"' 


14.  There  would  be  a  tendency  to  attract  population,  dependent 
upon  rapidity  with  which  change  is  made  in  New  York  and  rapidity  with 
which  other  places  show  equal  common  sense. 

15.  Many  of  those  who  live  above  the  line  of  dependence  would  be 
apt  to  take  larger  quarters.  Those  below  the  line  of  dependence  would 
probably  get  rid  of  the  lodgers  who  prevent  the  privacy  to  which  the 
workers  are  entitled,  and  spend  more  for  food  and  clothing  or  possibly 
indulge  in  the  luxury  of  saving  a  bit. 

16  Yes.  Rents  would  be  reduced  in  many  old  worn-out  tenement 
properties  on  which  the  taxes  would  be  increased  materially—because 
these  properties  would  have  to  compete  with  a  large  supply  of  good 

tenements.  ,,      ,  ^u  •  * 

17.    There  would  be  some  friction  for  the  landlord  to  get  their  rents. 

Tenants  have  eyes  and  can  read  "To  Let"  signs. 

18  Wages  depend  upon  the  margin  of  production,  or  upon  the 
produce  which  labor  can  obtain  at  the  highest  point  of  natural  pro- 
ductiveness open  to  it  without  the  payment  of  rent. 

Wages  fall  as  rents  rise. 

Wages  are  also  determined  by  the  law  of  supply  and  demand  over 
any  period  of  time.  Money  wages  may  be  increased  temporarily  by  or- 
ganization or  by  strikes,  and  money  wages,  in  certain  industries,  are 
higher  in  New  York  City  than  in  most  other  places,  but  it  is  doubttul 
whether,  considering  the  cost  of  living,  real  wages  are. 

If  rents  were  reduced  because  factories  and  other  employment  moved 
away  taking  workers  with  them  so  that  there  were  a  large  sudden  ex- 
cess of  accommodations,  then  money  wages  would  be  apt  to  fall  also  be- 
cause of  a  surplus  of  labor. 

When  rents  are  reduced  by  increasing  the  number  of  buildings, 
through  transferring  taxes  on  buildings  to  land  values,  the  stimulus  to 
industry  and  increased  employment  would  increase  wages,  because  of 
competition  to  get  workers. 

19.  High  rents  in  New  York  are  due  to  the  high  selhng  pnce  of 
land  and  to  heavy  taxes  on  buildings. 

20.  (a).    Land  speculators  claim  that  tenants  want  too  much  from 

the  city  now.  . 

(b).  Probably  tenants  would  not  be  any  less  interested  in  getting 
their  money's  worth  when  they  are  freed  from  double  taxation  than  they 
are  now  under  double  taxation. 

(c).  Question  is  irrelevant  and  misleading.  The  city  would  secure 
more  of  its  revenue  from  the  community-earned  ground  rents  and  less 
from  the  wages  of  the  workers.  The  Board  of  Estimate  and  Apportion- 
ment and  the  Board  of  Aldermen  vote  the  expenditures,  and  they  are 
almost  exclusively  land  owners  now,  and  probably  will  be. 

(d).  Such  an  honest  system  of  taxation  seems  a  healthy  tendency 
m  a  Democracy. 


SERIES   4. 

On  the  Effect  of  the  Untaxing  of  Buildings  Upon  Public  Revenue  and 

Public  Credit. 

1.  Obviously,  it  would  not. 

2.  The  revenue  from  the  land  would  be  determined  by  the  budget. 

144 


3.  Not  if  the  city  administration  is  honest  and  efficient. 

4.  Probably  about  100  per  cent.,  though  there  does  not  seem  to  be 
any  case  on  record  in  which  the  city  has  acquired  property  at  its  assessed 

value.  .    . 

5.  Cannot  be  answered  definitely.  Variation  from  proper  assess- 
ment could  be  largely  prevented  if  property  owners  would  permit  the 
true  price  paid  to  be  recorded  in  deeds. 

6.  Rarely,  if  ever.  The  reverse  is  more  apt  to  be  the  case,  as  build- 
ings have  three  dimensions  and  impress  themselves  upon  assessors,  while 
a  reduced  income  from  buildings  is  harder  to  appreciate. 

7.  Assessments  rarely  keep  up  with  the  claims  of  real  estate  brokers 
and  auctioneers— sometimes  they  may  exceed  speculative  values,  more 

often  they  lag  behind  them. 

8.  (a).  As  answered  repeatedly  before,  it  would  result  only  in 
retarding  the  increase  in  the  assessed  valuation,  i.  e.,  selling  price  of 
land  in  the  city,  if  it  were  put  into  operation  gradually,  and  would  not 
result  in  any  reduction  of  the  present  assessed  value  per  se. 

(b).  Assessed  valuation  should  represent  what  the  land  would 
bring  in  an  open  free  market ;  selling  value  for  speculative  purposes  rep- 
resents a  gamble  on  futures. 

9.  See  the  records  of  the  Tax  Department  for  this  non-germane 
question,  and  consider  also  the  heavy  assessments  for  premature  or  un- 
wise improvements,  to  benefit  favored  land  speculators. 

10.  The  assumption  is  misleading — probably  unintentionally.  The 
debt  limit  of  the  city  has  been  a  curse  to  it,  and  the  debt  service  of  the 
city  is  the  greatest  burden  on  the  city's  prosperity.  We  should  long 
since,  doubtless,  have  had  a  decent  system  of  getting  revenue,  except  that 
the  tax  rate  could  be  kept  fictitiously  low  by  borrowing  through  long- 
term  bonds.  It  would  be  best  to  adhere  rigorously  to  the  pay-as-you-go 
policy,  finally  adopted  only  when  it  had  to  be,  because  of   the  debt 

limit. 

11.  This  question  is  framed  to  deceive.  The  Committee  was  not 
appointed  to  investigate  or  discuss  any  such  proposition. 

No  change  in  the  method  or  percentage  of  assessment  is  advocated 
nor  considered,  but  a  gradual  reduction  of  the  tax  rate  on  buildings  to 
one  per  cent,  of  that  on  land  values  so  that  if  the  tax  rate  on  land  values 
were  $3.00  per  $100.00,  the  tax  rate  on  buildings  would  be  3c.  on  $100.00. 

As  long  as  buildings  are  taxed  at  all  they  are  subject  to  taxation, 
therefore,  the  constitutional  provision  as  to  the  debt  limit  would  not 

be  affected. 

The  Constitution  provides:  "The  amount  to  be  raised  by  tax  for 
county  or  city  purposes  in  any  county  containing  a  city  of  over  one  hun- 
dred thousand  inhabitants,  or  any  such  city  of  this  State  in  addition  to 
providing  for  the  principal  and  interest  of  existing  debt,  shall  not  in 
the  aggregate  exceed  in  any  one  year  two  per  centum  of  the  assessed 
valuation  of  the  real  and  personal  estate  of  such  county  or  city  to  be 
ascertained  as  provided  in  this  section  in  respect  to  county  or  city 
debt." 

In  1914: 

The  assessed  value  of  ordinary  real  estate  was $7,458,784,625 

The  assessed  value  of  real  estate  of  corporations  was. .  186,654,976 

The  assessed  value  of  personalty  was 340»395»56o 

Total    $7,986,735,161 

145 


1 


Ml 


urn  Jii: 


A  tax  rate  of  2%  upon  this  valuation  would  have  yielded. $159,734,703.22 
The  debt  service  was    52,283,178.64 


Total  amount  that  could  have  been  raised  by  tax.  .$212,017,881.86 
Taxes  on  Real  Estate,  Special  Franchises 

of  Corporation  and  Personalty  were $142,994,191.25 

Bank,  Excise  and  Mortgage  Taxes  were..      10,318,726.15 

Total   153,312,91740 


Additional  sum  that  might  have  been  raised  by  taxes  $58,704,964.46 

Obviously,  the  amount  that  can  be  raised  by  taxation  has  nothing 
to  do  with  the  relative  tax  rate  on  land  and  buildings  in  any  case,  and 
the  interjection  of  this  issue,  only  to  confuse  the  public  mind,  is  inex- 
cusable. 

The  important  fact  is  that  nearly  fifty-nine  million  dollars  more 
could  have  been  raised  last  year  in  the  city  by  taxes  however  levied, 
without  in  any  way  interfering  with  the  2%  tax  rate  bugaboo  invoked 
by  land  speculators  in  their  fight  to  prevent  honest  taxation. 
Three  other  factors  also  should  be  considered: 
(a).  The  adoption  of  the  "pay-as-you-go"  policy  for  self-sustain- 
ing improvements  and  the  payment  for  self-sustaining  improvements 
by  fifteen-year  serial  bonds  instead  of  by  fifty-year  bonds,  will  for  sev- 
eral years  increase  the  debt  service  materially,  and  so  increase  the 
amount  that  can  be  raised  by  taxes. 

(b).     As  admitted  by  those  opposed  to  the  change,  it  will  not,  at 
least,  reduce  the  assessed  value  of  land  below  present  figures,  and  it 
will  stimulate  the  construction  of  many  new  buildings,  so  increasing 
much  more  rapidly  the  total  assessed  value  of  real  estate.     The  tem- 
porary lull  in  the  selling  of  land,  due  to  the  war,  will  mean  a  more 
rapid  increase  hereafter.     The  increase  in  the  assessed  values  of  land 
and   buildings   will   probably   be   at   least  $175,000,000   to   $200,ooo,0(X) 
annually  within  a  few  years.     Even  assuming  that  the  prc»posed  change 
would  make  the  increase  in  assessed  land  values  $8,ooo,0(X)  a  year  less 
than  under  the  present  uniform  tax  rate,  while  making  the  increase  in 
the  assessed  value  of  buildings  $20,000,000  to  $30,000,000  a  year  greater, 
the  net  gain  will  be  appreciable,  so  that  the  city  can  raise  even  more 
by  taxation  within  the  2  per  cent,  rate  limit. 

(c).  The  revenue  the  city  will  receive  from  assessments,  water 
rates,  docks,  ferries  and  subways,  rentals,  reimbursements,  permits, 
licenses,  privileges,  tolls,  franchises,  fines,  interest  on  taxes,  etc.  sales 
of  city  articles  and  real  estate,  State  School  moneys,  etc.,  will  be  about 
the  same,  doubtless,  in  the  future  as  hitherto,  and  these  revenues 
amounted  last  year  (1914)  to  approximately  $43,409,000. 

12.  It  would  emphasize  the  justice  of  permitting  the  people  to 
recover  for  public  purposes  more  of  the  land  they  create. 

13.  Compactness  and  logical,  instead  of  straggling  and  illogical, 
development  would   reduce  municipal  expenditures. 

14.  An  assumption  so  contrary  to  fact  is  hardly  entitled  to  con- 
sideration. Many  of  the  narrowest  streets  are  in  the  most  congested 
districts.  Parks  are  needed,  but  not  supplied,  on  basis  of  population, 
whether  crowded  or  not. 

15.  In  general,  it  would  mean  less  taxes. 

U6 


16.  No  basis  for  determination,  but  it  seems  improbable. 

17.  Stupid,  deceitful  phraseology,  such  as  this,  should  not  be  used 
to  beg  the  question.  It  is  not  "confiscation"  to  recover  more  of  pub- 
licly created  values  for  public  use.  To  secure  more  of  these  values 
would  encourage  industry  and  improve  the  city's  financial  status.  As 
Mr.  Richard  M.  Hurd,  President  of  the  Lawyers  Mortgage  and  Trust 
Co.,  has  put  it,  "So  far  as  mortgage  lenders  are  concerned,  any  factor 
which  improves  housing  conditions  and  hence  the  wealth  and  produc- 
ing power  of  the  people  gives  a  genuine  and  underlying  strength  to 
real  estate  values."     It  does  the  same  to  the  city's  credit. 

18.  It  would   distinctly  tend  to   diminish   them— except   for  land 

speculators.  ,    ,     •  •     -^       r 

19      Only  if  the  change  would  benefit  an  overwhelmmg  majority  ot 

the  people,  and  that  it  would  is  admitted  by  the  opponents  of  the  plan. 


SERIES    5. 
Upon  the  Effect  of  the  Untaxing  of  Buildings  Upon  Mortgage  Loans. 


I. 


case. 


2. 

3- 

4. 

5. 

6. 

7- 
8. 

9. 

10. 

II. 
12. 


Not  at  all  per  se  in  a  growing  section,  and  probably  not  in  any 
(See  Answer  to  Question  17,  Series  3.) 
Same  as  i. 
Same  as   i. 
No  records  available. 
By  careful  lenders  about  two-thirds. 
About  half. 

Not  much  over  a  third  to  two-fifth«i. 
Half  or  a  little  more. 
Not  much. 

None. 

No  statistics  available. 

It  almost  never  would,  per  se,  and  the  active  causes  of  any 
decrease  would  have  to  be  known  before  the  question  can  be  answered. 

13.  It  is  inconceivable  that  any  such  reduction  would  be  brought 
about  by  the  proposed  change.  Assuming  it,  however,  as  one  of  the 
many  improbabilities  dragged  into  this  question,  only  inexcusable  shoe- 
string equities  would  be  wiped  out,  and  no  mortgages  would  have  to 

be  foreclosed. 

14.  It  would  not  have  either  eflFect  per  se,  for  the  selling  price  of 
the  land  would  remain  constant  or  increase  very  slowly.  By  reducing 
the  selling  price  of  land  below  what  it  would  be  in  ten  years  hence; 
with  a  uniform  tax  rate  on  land  values  and  buildings,  and  hence  a  lower 
tax  rate  on  land  values;  it  would  release  more  money  for  productive 
investment  and  reduce  interest  rates  through  competition  of  capital. 
Speculative  loans  command  a  higher  rate  of  insurance  which  is  not 
really  interest,  though  the  distinction  is  frequently  overlooked. 


U7 


t 


ft 


-._  .tri-;-^'~- 


I 


. 


f 


II 


iti. 


ANSWERS  TO  QUESTIONS  SUBMITTED  BY  THE  ADVISORY 
COUNCIL  OF  REAL  ESTATE  INTERESTS. 


SERIES  I. 


On  the  Effect  of  the  Untaxing  of  Buildings  Upon  Land  Values  and 

Upon  Speculation  in  Land. 

1.  The  development  of  land  values  in  different  parts  of  the  city 
has  been  very  irregular,  depending  upon  the  development  of  transit 
facilities,  causing  appreciation  in  one  section,  and  sometimes  very  seri- 
ous depreciation  in  another  section. 

2.  The  effect  of  the  new  subway  system  will  be  to  equalize  values 
in  the  outlying  boroughs,  probably  creating  a  tendency  to  decrease,  to 
some  extent,  the  land  values  in  the  central  borough.  This,  with  regard 
to  the  central  section,  may  be  offset  by  an  increase  in  the  growth  of 
the  city.  However,  the  prospective  increases  in  land  values  have  been 
very  largely  discounted. 

3.  See  the  records  of  the  Tax  and  Tenement  House  Departments. 

4.  The  transfer  of  the  tax  from  buildings  to  land  can  never 
increase  the  capital  value  of  improved  land.  For  instance,  in  the  case 
of  the  two  parcels  mentioned,  assuming  that  the  transfer  would  operate 
to  diminish  the  capital  value  of  land  by  10%,  the  diminution  for  parcel 
A  would  be  $7,000,  making  it  worth  $93,000,  while  parcel  B  would  be 
decreased  in  value  by  $3,000,  and  then  be  worth  $97,000.  In  either 
case  the  value  of  the  property  would  be  less  than  $100,000.  There  is 
no  reason  to  suppose  that  any  compensating  increase  would  occur  as 
to  the  value  of  the  improvements. 

5.  Under  ordinary  conditions  in  Manhattan,  the  appropriate  im- 
provement of  land  changes  on  an  average  in  from  twenty  to  thirty 

years.  •      1  1        1. 

6.  The  value  of  a  piece  of  vacant  land  is  determined  by  the  esti- 
mate formed  of  the  net  revenue  which  may  be  obtainable  from  that 
land  when  it  can  be  advantageously  improved.  The  capitaHzation  of 
this  revenue,  discounted  to  allow  for  interest,  on  the  money  now 
invested  and  taxes,  or  carrying  charges,  from  the  present  time  until 
that  supposed  time  of  advantageous  improvement,  is  the  present  value. 
Expectation  of  revenue  in  the  meantime  and  uncertainty  of  income  are 
elements  causing  variation. 

7.  The  taxpayer,  strictly  speaking,  occupies  but  a  very  small 
part  of  the  improved  area  of  the  city. 

8.  Increase  of  land  values  is  due  to  increase  of  population,  increase 
of  community  wealth  and  many  other  causes. 

9.  If  there  were  no  other  element  to  be  considered,  then  there 
would  be  a  decrease. 

10.  See  answer  to  question  6.  rr  j 
II      High  or  low  land  values  are  to  be  regarded  as  an  effect  and 

not  as  a  cause.     Whatever  the  system  of  taxation  may  be.  the  rental 

148 


value  of  land  is  determined  by  the  advantage  to  be  derived  from  the 
occupancy  of  the  land.  Therefore  the  desirability  of  high  or  low  land 
values  is  not  a  practical  question. 

12  There  is  no  appreciable  purchase  of  property  in  New  York 
City  with  a  view  of  holding  it  out  of  use  for  long  periods  and  then 
reseUing  it  at  a  profit,  for  the  simple  reason  that  the  carrying  charges 
are  so  great  that  such  a  course  would  mean  that  there  would  be  no 
profit  When  one  man  buys,  another  sells,  and  the  transaction  is 
quite  as  likely  to  hasten  the  bringing  of  land  into  use  as  to  retard  it. 

13  No;  there  would  be  a  general  depreciation  of  land  values. 
There  would  be  no  diminution  in  speculation,  but  speculation  would 

be  on  a  lower  level.  r  1     j 

14  Unwholesome ;  because  there  would  be  a  destruction  ot  land 
values  and  a  loss  of  confidence,  resulting  in  discouragement  of  initia- 
tive. No  speculation  means  no  pioneering;  no  pioneering  means  no 
erowth  or  development.  , 

iq  If  land  speculation  were  carried  on  as  stock  and  produce 
speculation  is  carried  on,  it  might  be  considered  injurious;  but  land 
speculation  cannot  be  conducted  in  that  way. 

16  Very  little  land  is  held  out  which  is  ripe  for  improvement  and 
can  secure  financing.     To  hold  land  beyond  such  a  pomt  would  mvite 

17.'  Better  by  a  proper  land  increment  tax  because  this  reflects 

^  ^Vs.  \ny^  additional  burden  to  shrinking  values  would  aggravate 
the  effect  of  depreciation  and  tend  towards  panic. 

19.  (a).  Loans  would  be  called,  in  order  to  re-estabhsh  margins, 
because  of  the  loss  in  capital  value. 

(b).     See  answer  to  question  4. 
(c).     See  answer  to  question  4. 

20.  See  records  of  the  Tax  Department. 

21  Nearly  all  mortgages  are  owned  by  small  investors  because 
life  insurance  companies,  savings  banks  and  other  financial  institutions 
interested  in  real  estate  are  only  intermediaries  for  pohcy  holders,  de- 
positors, and  so  forth.  -r»     1    .  1     T7/r    4.       r 

22  See  the  report  of  Dr.  Haig  upon  "Some  Probable  Effects  of 
the  Exemption  of  Improvements  from  Taxation  in  the  City  of  New 

York." 

23.  See  the  answer  to  question  22. 

24.  See  the  answer  to  question  22. 

25.  See  the  answer  to  question  22. 

26.  See  the  answer  to  question  22. 


SERIES    2. 
On  the  Effect  of  the  Untaxing  of  Buildings  Upon  Building  Operations, 

Housing  Conditions  and  Congestion. 

1.  Land  will  not  be  used  until  it  is  ripe  and  financing  is  available. 

2.  See  answer  to  question  i. 

3.  See  answer  to  question  i. 

4.  In  general,  any  additional  impost  on  land  would  tend  to  a  more 
intensive  use  of  the  land  beyond  the  point  of  appropriateness. 

149 


) 

^ 


Il 


5.  (a).     Yes. 

(b).     Impossible  to  answer. 

6.  See  answer  to  question  4. 

7.  Yes. 

8.  Every  available  inch  would  be  covered  in  central  locations. 

9.  See  answer  to  question  8. 

10.  In  direct  proportion  to  the  increased  congestion. 

11.  See  answer  to  question  10. 

12.  To  a  great  extent,  as  illustrated  in  the  reports  of  Dr.  Haig. 
It  would  be  better  to  untax  buildings  after  the  additional  legislation 
referred  to  was  first  obtained. 

13.  To  a  considerable  extent ;  and  it  would  be  a  bad  thing. 

14.  This  depends  entirely  upon  whether  the  policy  of  untaxing 
buildings  would  decrease  or  increase  actual  rents  to  the  occupant,  and 
to  what  extent  this  would  take  place. 

15.  Yes. 

16.  Yes. 

17.  No. 

18.  It  would  tend  somewhat  to  offset  the  effect  of  the  higher  tax. 
but  the  net  result  is  stated  in  the  answer  to  question  13.  Accordingly, 
the  second  part  of  this  question  lapses. 

19.  The  net  return  is  the  best  criterion. 

20.  No  source  of  information. 

21.  No  source  of  information. 

22.  Yes. 

23.  Yes  to  the  first  part  of  this  question ;  at  the  point  of  over- 
production is  the  answer  to  the  second  part. 

24.  Same  as  elsewhere.     See  the  reports  of  Dr.  Haig. 

25.  The  necessity  for  city  planning  for  outlying  districts  would 
be  deferred  by  reason  of  the  intensification  of  the  tendency  towards 
concentration  in  the  older  parts  of  the  city. 

26.  Buildings  never  attract  anyone. 

27.  Much  more  difficult. 


SERIES    3. 

On  the  Effect  of  the  Untaxing  of  Buildings  Upon  Rent. 

1.  Very  little. 

2.  In  regard  to  business  property,  slightly.  To  a  greater  extent 
in  regard  to  tenement  houses  during  hard  times.  When  times  are  good 
and  houses  are  fully  rented,  expenses  are  not  so  important,  but  during 
hard  times,  many  vacancies  and  loss  of  rent  cause  leasing 

3.  Five  to  twenty-one  years.  Renewals  usually  only  in  case  of 
ground  lease.  The  other  terms  mentioned  vary  with  the  character  of 
the  building,  while  all  these  items  may  be  found  in  some  leases. 

4.  Nearly  entirely. 

5.  Landlord  usually  attends  to  improvements  and  maintenance. 

6.  Usually  all  these  services,  with  the  exception  of  lighting,  are 
rendered  by  the  landlord. 

7.  When  contemplating  investment  in  real  estate,  the  rent  return 
is  expected  to  cover  the  standard  rate  of  interest  on  the  investment  m 
land   and   building,    operating   and    "maintenance    expenses    (including 

150 


taxes),  and  allowance  for  annual  depreciation  on  the  improvement, 
account  bemg  taken  furthermore  of  the  expected  increase  in  the  value 
of  the  land  and  also  of  the  benefit  or  burden  resulting  as  regards  the 
buildmg,  by  reason  of  the  increasing  value  of  the  land.  Actual  rent  is 
purely  a  question  of  supply  and  demand. 

8.  Yes. 

9.  Yes. 

10.  (a).     Taxes  levied  on  a  building  are  properly  regarded  as  part 
of  the  operatmg  expenses. 

(b).     Yes. 

(c).  A  high  tax  rate  on  buildings  theoretically  increases  rents 
A  high  tax  rate  on  land  theoretically  has  the  effect  of  reducing  the 
value  of  the  land  and  falls  on  the  landlord,  but  the  only  reason 
why  the  tax  on  buildings  is  declared  to  be  shifted  to  the 
tenant  while  that  on  the  land  is  not,  is  to  be  found  in  the  competition 
of  builders.  A  policy  of  high  taxation  on  land  would  operate  as  a  great 
discouragement  to  real  estate  investment  and  building  enterprise  thus 
tending  to  counteract  the  supposed  stimulus  to  building. 

11.  To  an  extent  determined  by  the  amount  of  that  expected  appre- 


ciation. 
12. 

13. 

14. 

15. 
16. 

17- 
18. 


See  answer  to  question  ii. 

In  the  case  supposed,  the  effect  would  be  general. 

An  answer  here  would  be  mere  guess  work. 

See  answer  to  question  14. 

No. 

Yes. 

High  rents  are  one  of  the  causes  of  high  wages  and,  accord- 
ingly, a  decrease  in  rents  would  tend  to  lower  wages. 

19.     (a).     High  rents  cause  high  land  values  and  not  the  converse 
Relative  influence  of  taxes  upon  rent  is  a  subordinate  one" 
(a).     Some  do  and  some  do  not. 
Yes. 
Yes. 
No. 


(b). 

20. 

(b). 

(c). 

(d). 


SERIES 


On  the  Effect  of  the  Untaxing  of  Buildings  Upon  Public  Revenue  and 

Public  Credit. 

1.  No. 

2.  The   revenue   from   the    land   would   be   whatever   the   budg-et 
requires,  and  the  rate  would  be  determined  accordingly. 

3.  If  the  city  officials  do  their  work  honestly,  there  should  be  no 
over  assessment. 

4.  To  a  large  extent  assessment  is  higher  than  the  true  value 

5.  Tax  officials  seize  upon  increases  promptly  and  are  loath  and 
slow  to  grant  decreases. 

6.  To  a  very  great  extent. 

7.  To  a  large  extent  and  in  some  cases  exceed  them. 

\s  ^^h.   ^^^  depending  upon  the  efficiency  of  the  tax  department 

(b).     There  is  no  clear  distinction. 

9.     See  the  records  of  the  Tax  Department. 

151 


■h; 


10.  If  the  bankers  and  bond  investors  realized  that  there  was  an 
over  assessment  it  would  very  detrimentally  affect  the  sale  of  city 
bonds. 

11.  We  are  advised  that  the  courts  would  be  likely  to  hold  that 
the  99%,  which  would  be  excluded  from  computation,  would  not 
be  included  in  the  base  upon  which  the  constitutional  debt  limit  would 
be  figured.  The  effect  upon  the  constituti(»nal  tax  rate  would  have  to 
be  determined  by  adding  the  impost  on  the  land  to  the  impost  on  the 
building  and  then  finding  whether  the  two  together  exceeded  the  con- 
stitutional tax  rate. 

12.  No. 

13.  Congestion  of  population  would  increase  the  cost  of  govern- 
mental functions  such  as  police,  health,  fire,  charities,  corrections,  etc. 

14.  The  loss  of  income  and  the  cost  of  maintenance  of  parks,  open 
spaces,  wider  streets,  etc.,  would  be  in  proportion  to  the  value  of  prop- 
erties affected  by  these  improvements. 

15.  Higher  taxes. 

16.  An  answer  to  this  question  would  be  mere  guess  work. 

17.  Very   seriously. 
See  answer  to  Question  20,  Series  3. 
Yes. 


18. 
19- 


SERIES    5. 
On  the  Effect  of  Untaxing  of  Buildings   Upon  Mortgage   Loans. 


I. 

talized 
2. 

3- 
I. 

4. 
gages. 

5. 
6. 

7- 
8. 

9. 

10. 

II. 

12. 

tion  to 

13- 

with  a 

14. 


To  an  extent  of  the  increase  of  taxation  upon  land  value  capi- 
at the  prevailing  rate  of  interest. 
To  the  same  extent  as  stated  in  the  answer  to  question  i. 
At  least  to  the  same  extent  as  stated  in  the  answer  to  question 

Probably  9/10.    Unable  to  state  as  to  second  and  third  mort- 

By  intelligent  lenders,  662/3%. 

About  50%. 

From  40%  to  50%. 

From  75%  to  80%. 

Hardly  any. 

None. 

Unable  to  state. 

If  such  a  policy  were  introduced,  much  more  than  in  propor- 
the  loss  of  capital  value. 

This  might  bring  about  a  wholesale  foreclosure  of  mortgages, 
resulting  real  estate  panic. 

Both. 


152 


ANSWERS    TO    QUESTIONS    SUBMITTED     BY    THE    REAL 
ESTATE  BOARD  OF  NEW  YORK  THROUGH  A  SUB- 
COMMITTEE  OF  ITS  COMMITTEE  ON  LEGIS- 
LATION AND  TAXATION. 


Sub-Committee  of  Committee  on  Legislation  and  Taxation. 

DAVID  A.  CLARKSON,  Chairman 

E.  A.  ALEXANDER 
CHARLES  H.  AYRES 
JESSE  C.  BENNETT 
JOS.  L.  BUTTENWIESER 
EDWARD  C.  CAMMANN 
RICHARD  COLLINS 
ROBERT  E.  DOWLING 
JOHN  P.  LEO 
LAURENCE  McGUIRE 
E.  A.  TREDWELL 


SERIES    I. 

On  the  Effect  of  the  Untaxing  of  Buildings  Upon  Land  Values  and 

Upon  Speculation  in  Land. 

1.  So  far  as  we  know  the  development  of  land  values  in  different 
parts  of  the  city  has  always  been  irregular.  We  cannot  say  to  what 
extent.  Land  values  have  decreased  in  some  portions  while  in  others 
they  have  increased,  and  the  causes  have  been  various,  such  as  removals 
from  established  trade  centres  to  new  centres,  from  old  residential  sec- 
tions to  new,  and,  markedly,  changes  in  the  transportation  system,  desir- 
ability of  new  buildings  over  old,  etc. 

2.  There  is  no  way  of  predicting  normal  increase.  If  the  experi- 
ence of  the  past  is  repeated,  property  along  the  line  of  the  new  subway 
will  be  generally  improved  in  value.  We  cannot  say  as  to  what  extent 
the  prospective  increase  has  been  discounted. 

3.  We  cannot  answer  this  question. 

4.  The  transfer  of  the  tax  from  buildings  to  land  cannot  increase 
the  value  of  improved  land.  The  capital  value  of  parcel  B  as  a  whole 
might  be  increased,  but  the  land  value  will  not  be  increased. 

5.  We  are  unable  to  answer  this  question. 

6.  Standards  employed  in  fixing  land  values  vary  from  one  district 
to  another. 

7.  To  a  very  slight  extent. 

8.  Increased  land  values  are  the  result  of  increase  of  wealth  as  well 
as  population. 

153 


111 


€' 


.        I' 


9.  The  effect  on  the  aggregate  land  values  in  New  York  City 
would  be  detrimental,  if  it  were  known  that  the  population  of  the  city  as 
a  whole  would  remain  stationary. 

10.  We  are  unable  to  answer  this  question. 

11.  It  depends  upon  what  the  city  government  wishes  to  do.  In 
prosperous  cities,  land  values,  generally  speaking,  are  high. 

12.  To  a  very  slight  extent. 

13.  We  are  not  sure  whether,  or  to  what  extent,  the  effect  would  be 
to  discourage  land  speculation.  Speculation  does  not  permanently  cre- 
ate land  value. 

14.  We  do  not  know. 

15.  We  cannot  answer  the  first  part  of  this  question  except  to  say 
that  speculation  tends  to  restrain  sharp  changes  in  value.  Land  specu- 
lation differs  as  much  from  speculation  on  the  stock  and  produce  ex- 
changes as  the  ordinary  mercantile  transactions  differ  from  land  specula- 
tion. 

16.  To  a  very  slight  extent.  Most  land  held  in  an  unimproved  state 
is  so  held  because  there  is  no  demand  for  it.  Very  often  the  demand 
comes  too  late  to  result  in  profit  to  the  owner. 

17.  We  do  not  assume  that  the  transfer  of  the  tax  would  stabilize 
values  and  check  speculation. 

18.  We  cannot  say;  probably  to  a  considerable  extent. 

19.  The  change  to  a  tax  system,  with  which  they  are  unfamiliar 
and  fear,  would  have  a  disturbing  effect  in  the  minds  of  lenders.  The 
transfer  of  the  tax  from  buildings  to  land  which  will  neither  increase 
nor  decrease  on  a  particular  parcel  of  real  estate  would  undoubtedly 
affect  the  lender's  security,  as  the  value  of  the  land  is  decreased  even 
though  the  net  tax  remains  the  same. 

20.  We  should  say  the  land  of  New  York  is  owned  by  a  consider- 
able number  of  owners — approximately  200,000. 

21.  The  number  of  owners  of  real  estate  mortgages  is  very  large. 
We  should  say  there  are  probably  as  many  lenders  as  there  are  owners. 

22.  It  depends  upon  whether  the  increased  tax  on  the  land  would 
be  offset  by  a  greater  or  less  decrease  in  the  tax  on  the  building. 

23.  It  depends  upon  the  relative  value  of  the  land  to  the  building. 

24.  It  would  depend  upon  the  proportion  of  the  value  of  land  to 
building. 

25.  We  think  it  would  have  the  effect  of  increasing  the  taxes  on 
the  owners  of  small  properties. 

26.  We  are  unable  to  answer  this  question. 


SERIES    2. 

On  the  Effect  of  the  Untaxing  of  Buildings  Upon  Building  Operations, 

Housing  Conditions,  and  Congestion. 

I.  Yes,  during  the  first  few  years  of  the  operation  of  a  law  untax- 
ing buildings;  because  the  heavy  burden  of  taxes  laid  upon  the  land 
and  the  exemption  of  the  improvements  from  taxation  would  combine 
to  induce,  almost  to  the  point  of  coercion,  the  owner  of  vacant  or  inade- 
quately improved  land  to  erect  new  buildings.    Of  course,  the  stimulus 

154 


would,  after  a  few  years.  l;c  dissipated  by  the  over-production  which 
would  result  from  the  artificial  inducement  to  build. 

2.  It  seems  unreasonable  to  suppose  that,  except  in  rare  instances, 
men  would  make  large  outlays  for  unproductive  improvements,  unless 
they  saw  an  immediate  opportunity  for  sale  to  builders.  In  fact,  enact- 
ment of  the  proposed  law  would  operate  indirectly  as  a  damper  upon  any 
activity  in  this  direction. 

3.  A  law  untaxing  buildings  would  operate  just  as  in  the  case  of 
vacant  land,  but  in  inverse  ratio  to  the  value  of  the  building,  that  is  to 
say,  if  the  building  and  the  land  were  of  equal  value,  the  temptation  to 
replace  the  old  building  by  a  new  one  would  be  slight.  According,  how- 
ever, as  the  building  represents  less  value  and  the  land  more  value,  the 
inducement  to  erect  a  new  building  increases  during  the  first  years  of 
the  operation  of  the  law. 

4.  Yes. 

5.  We  are  inclined  to  think  that  the  untaxing  of  buildings  would 
stimulate  improvement,  first  of  the  most  valuable  of  the  lands  still 
unimproved  or  most  inadequately  improved,  irrespective  of  their  prox- 
imity to  the  business  centers.  We  cannot,  however,  conceive  that  there 
would  be  land  more  valuable  than  that  near  the  centers  of  business, 
excepting  a  very  few  restricted  private  residence  sections,  which  may  not 
in  all  cases  respond  to  the  unalterable  law  of  supply  and  demand.  We 
hardly  think  that  an  equilibrium  will  ever  be  reached,  but  rather  that 
the  untaxing  of  buildings  would  finally  result  in  a  serious  over-produc- 
tion and  a  final  upheaval  of  all  values,  with  the  result  that  the  experi- 
ment would  have  to  be  discontinued,  but  not  until  irreparable  injury 
would  have  been  done,  not  alone  to  owners,  but  also  to  the  City's  credit 
and  to  its  bonded  indebtedness. 

6.  Most  assuredly.    It  could  not  fail  to  have  that  effect. 

7.  Absolutely ;  it  follows  as  a  corollary  to  No.  6. 

8.  So  far  as  these  spaces  are  under  private  ownership,  they  would 
certainly  be  promptly  built  up  during  the  first  few  years  of  the  operation 
of  the  law. 

9.  This  question  has  practically  been  answered  above.  Human 
nature  will  always  remain  the  same  and  naturally  every  owner  would, 
if  the  law  were  enacted,  be  tempted  to  improve  the  largest  possible 
percentage  of  his  land  with  the  highest  building  he  could  possibly  erect. 

10.  The  congestion  that  would  ensue  would  result  in  conditions  so 
serious  that  no  man  can  foresee  what  the  city  could  do  to  provide  open 
spaces,  especially  in  the  central  part  of  the  city.  Besides,  we  fear  the 
enactment  of  the  law  would  reduce  the  city  to  such  straits  that  it  would 
be  powerless  to  raise  the  large  additional  funds  required  to  provide  such 
open  spaces. 

11.  If  it  were  possible  further  to  tax  values,  which  under  the  opera- 
tion of  the  proposed  law  would  rapidly  have  decreased,  it  would  add 
heavy  items  to  the  City  Budget.  One  need  but  turn  to  the  prices  which 
had  to  be  paid  for  the  land  for  the  new  court  house  to  judge  what  would 
be  the  cost  of  supplying  open  spaces  in  the  center  of  New  York.  The 
cost  would  be  prohibitive. 

12.  Of  course,  the  untaxing  of  buildings  would  necessitate  limita- 
tion of  heights  of  buildings  and  proportion  of  lot  space  covered.  Since 
it  is  inconceivable  that  those  who  have  the  interests  of  the  city  at  heart 
would  ever  say  that  the  untaxing  of  buildings  is  desirable,  the  question 
of  whether  the  enactment  of  the  law  untaxing  buildings  should  precede 

156 


flli' 


(■■  'ii 


or  follow  the  legislation  above  referred  to,  is  academic.  It  would,  how- 
ever, be  far  wiser  to  have  the  limitation  of  height  of  buildings  and  pro- 
portion of  space  covered  precede  the  enactment  of  the  law  untaxing 
buildings,  which  we  trust  no  legislature  will  ever  be  unwise  enough 
to  put  upon  the  statute  book. 

It  would  discourage  it  and  would  be  an  undesirable  result. 

14.  No,  it  would  have  no  effect  in  this  regard.  Owners  and  specu- 
lators will  always  adopt  the  design  which  rents  the  best  and  which  will 
produce  the  largest  returns. 

15.  Yes,  it  would  depreciate  the  value  of  the  old  buildings. 

16.  Not  to  any  great  extent.  Taxpayers  will  be  built  on  valuable 
land,  irrespective  of  the  exemption  of  the  building. 

17.  Perhaps  not  at  first,  but  certainly  in  the  end. 

18.  It  might,  after  years  of  operation  oi  the  law. 

19.  The  number  of  vacancies  in  the  particular  class  of  buildings 
and  the  comparative  rents  paid  for  the  occupied  portions.  The  loan 
market  does,  at  times,  tend  to  discourage  speculative  builders  from 
erecting  any  more  of  the  class  of  buildings  for  which  there  is  no  demand. 

20-21.  To  answer  these  questions  (Nos.  20  and  21)  with  any  satis- 
factory degree  of  accuracy  would  require  many  months  of  careful  inves- 
tigation in  order  to  secure  the  necessary  statistics.  .         ,      r-        r 

22.  The  modern  and  better  type  of  buildings,  during  the  first  few 
years  of  their  construction,  are  more  fully  occupied  than  the  older  and 
inferior  types.  It  does  not,  however,  tend  to  force  a  destruction  of  the 
older  and  less  suitable  buildings  except  where  the  latter  are  grossly 

inadequate  and  dilapidated.  ,.       . 

2^  In  regard  to  the  increased  cost  of  building  tending  to  operate 
as  a  check  to  over-production,  it  would  seem  to  us  that  over-production 
would  check  itself  almost  irrespective  of  a  rise  in  the  prices  of  materials. 
The  labor  unions  pretty  well  steady  the  cost  of  labor  in  the  building 

24..     No  other  appreciable  effect  than  upon  other  property  similarly 

^^^"^25.  '  It  is  very  hard  to  foretell,  but  probably  not  beneficial  to  the 

interests  of  the  community.  ^     ,  ,  1  4. 

26  Population  is  attracted  to  New  York  by  profitable  employment 
and  the  attractions  and  opportunities  offered  by  a  large  ^ity  rather  than 
by  supply  of  buildings.  Either  transit  facilities  would  have  to  be  greatly 
increased  or  the  overcrowding  in  traffic  would  be  seriously  aggrav^^^^^^^^ 
if  it  can  be  established  that  large  numbers  would  be  shifted  to  outlying 

sections  ^^^^^^^^^^^^  system  would  have  to  be  changed  and  reconstructed, 
the  sidewalks  and  streets  would  not  be  wide  enough  to  accommodate 
those  who  want  to  use  them,  nor  would  there  be  -^m  ^^-J^^^^^^^^^ 
traffic  This  is  evidenced  by  the  present  condition  of  Nassau  btreet, 
even  Broadway  during  rush  hours  would  be  congested  beyond  endur- 
ance. 

SERIES   3. 
On  the  Effect  of  the  Untaxing  of  Buildings  Upon  Rent. 
I      Only  a  small  proportion  of  land  in  New  York  City  is  leased  on 
the  basis  of  pure  ground  rents— less  than  one  per  cent. 

156 


2.  Parcels  of  improved  real  estate  are  not  usually  leased  as  a  whole 
—not  three  per  cent,  of  all,  excepting  private  dwellings. 

3  Building  leases  are  usually  made  in  terms  of  one,  three  or  five 
years,'  sometimes  with  privilege  of  renewal.  If  the  tenant  takes  the 
entire  building,  he  usually  makes  interior  repairs,  sometimes  exterior, 
but  except  in  cases  of  leases  of  twenty-one  years,  it  is  customary  for 
the  owner  to  pay  taxes,  assessments,  etc. 

4  Much  the  greater  number  of  buildings  are  leased  or  rented  in 
part  or  piecemeal,  approximately  97%,  except  in  case  of  private  resi- 
dences. 1      1      ji     J 

5.  When  a  building  is  leased  to  several  tenants  the  landlord  main- 
tains and  repairs  it. 

6.  When  a  building  is  leased  to  several  tenants  the  landlord  fur- 
nishes elevator  and  janitor  service ;  sometimes  light  and  heat. 

7.  All  the  elements  mentioned  in  Nos.  5  and  6  are  included  in  the 
rent,  in  addition  to  taxes  and  interest  on  investment. 

8  Ground  leases  have  never  been  largely  taken  in  New  York  City 
in  relation  to  its  size.  They  were  more  common  formerly,  when  the  rate 
of  interest  paid  on  bond  and  mortgage  was  higher  than  the  rate  the 
ground  rent  bore  to  the  value  of  the  land.  At  present  but  few  new 
Iround  leases  are  made.  The  owner  of  the  land  usually  sought  for 
security  of  income  and  freedom  from  care,  but  not  for  the  highest 
return. 

Q  Since  under  all  long-term  ground  leases,  the  lessee  and  not 
the  landlord  pays  the  taxes,  there  would  be  no  possibility  for  any 
change  in  the  ground  rent  until  the  expiration  of  the  existing  lease 
Upon  the  expiration  of  existing  lease  the  amount  of  ground  rent  would 
be  determined  by  the  valuation  of  the  land  at  that  moment.  But,  in 
most  cases  the  ground  rent  could  not  be  reduced,  since  most  ground 
leases  contain  a  provision  that  the  renewal  shall  be  at  a  rental  not  less 
than  the  original  lease. 

ID  It  is  clear  that  finally  a  higher  tax  rate  upon  improved  prop- 
erty whether  upon  land  and  buildings,  or  upon  either,  or  upon  both,  wili 
in  the  end  result  in  higher  rents.  Tenants  do  not  take  the  rate  of  taxes 
paid  by  the  landlord  into  consideration  when  negotiating  for  a  lease. 
They  only  pay  as  rent  the  worth  of  the  premises  leased  as  compared  with 
other  premises.  If,  however,  taxes  were  so  high  as  to  bring  the  net 
return  below  the  interest  returned  on  other  forms  of  capital,  no  new 
buildings  would  be  put  up  until  rents  increased  sufficiently  to  bring  as 
large  a  net  return  on  the  money  invested  as  would  equal  the  prevaihng 
rate  of  interest  on  capital. 

11.  It  has  not  been  the  custom  among  owners  of  real  estate  in 
New  York  to  carry  a  fund  to  cover  the  depreciation  of  buildings,  as  the 
expected  increase  in  the  value  of  land  has  been  relied  upon  to  cover  this 
loss ;  it  may,  therefore,  be  presumed  that  rents  have  been  less  by  as  much 
as  would  have  been  sufficient  to  create  such  a  fund. 

12.  If  the  present  tax  on  buildings  were  transferred  to  land,  it  would 
diminish  land  values  and,  consequently,  owners,  to  cover  the  deprecia- 
tion of  their  buildings,  would  have  to  add  such  a  depreciation  charge 
to  rent,  in  order  to  obtain  a  return  sufficient  to  yield  the  prevailing  rate 
of  interest  on  capital. 

13.  Accepting  the  hypothesis  that  this  change  of  taxation  would 

157 


Il 


result  in  a  fall  in  rents,  it  would  affect  the  older  and  poorer  buildings 
most  severely. 

14.  How  greatly  such  a  change  would  tend  to  draw  population  to 
New  York  from  outside  is  impossible  to  estimate.  It  would  depend  on 
the  fall  in  rents  and  could  only  be  brought  about  by  a  large  increase  in 
building. 

15.  If  such  a  fall  occurred,  the  choice  of  occupancy  of  larger  spac^ 
at  the  same  rent  or  the  same  space  at  lower  rent  would  depend  upon 
the  enterprise  of  the  tenant  and  the  prevailing  conditions  in  the  business 
world  at  the  time  of  the  change. 

16.  The  reduction  in  rents  might  conceivably  be  greater  than  the 
amount  of  tax  transferred  if  it  led  to  such  a  change  in  values  as  would 
result  in  a  panic  in  real  property. 

17.  The  necessity  of  certain  classes  of  workers  to  live  near  their 
places  of  employment;  the  desire  of  many  to  remain  in  the  neighbor- 
hoods to  which  they  have  been  accustomed  ;  and  the  natural  tendency 
of  foreign  peoples  to  concentrate  in  a  district;  all  would  tend  to  check 
the  mobility  of  the  renting  population. 

18-19.  Higher  rents  and  higher  wages  in  New  York  than  in  most 
other  cities  come  from  the  greater  opportunities  offered  here;  if  from 
any  cause  these  opportunities  were  diminished  both  would  fall.  But  it 
must  be  remembered  that  wages  and  rents  do  not  necessarily  move  in 
parallel  lines. 

20.  As  long  as  buildings  are  taxed  and  some  portion  of  the  city's 
expenditures  laii  upon  tenants,  they  have  an  interest  in  keeping  down 
the  expense  of  government.  If  it  is  true  that  the  proposed  untaxing  of 
buildings  throws  the  payment  of  the  greater  part  of  the  taxes  on  the 
land  owners,  who  form  but  a  small  class  of  the  community,  and  relieves, 
for  the  most  part,  all  other  classes  from  taxation,  it  would  certainly  dim- 
inish care  for  economical  government.  It  would  be  most  unfortunate  in 
a  democracy  to  have  all  or  practically  all  expenditures  paid  for  by  those 
who  by  reason  of  their  small  number  have  but  little  voice  in  the  govern- 
ment. Would  not  such  a  condition  afford  an  almost  irresistible  tempta- 
tion for  the  many,  for  their  own  benefit,  to  exploit  the  few?  Would  not 
the  use  of  taxes  for  all  kinds  of  extravagance  and  schemes  ensue?  If 
all  taxes  were  placed  upon  land,  would  not  the  taking  of  all  land  value 
by  taxation  result,  as  was  so  forcibly  predicted  by  Henry  George  in  his 
"Progress  and  Poverty"  in  these  terse  sentences: 

"I  do  not  propose  either  to  purchase  or  to  confiscate  private  property 
in  land.  The  first  would  be  unjust ;  the  second  needless.  Let  the  indi- 
viduals who  now  hold  it  still  retain,  if  they  want  to,  possession  of  what 
they  are  pleased  to  call  their  land.  Let  them  continue  to  call  it  their 
land.  Let  them  buy  and  sell,  and  bequeath  and  devise  it.  We  may 
safely  leave  them  the  shell  if  we  take  the  kernel.  It  is  not  necessary  to 
confiscate  land ;  it  is  only  necessary  to  confiscate  rents.  '•^  *  *  We  may 
put  the  proposition  into  practical  form  by  proposing  to  abolish  all  taxa- 
tion save  that  upon  land  values.  ♦  ♦  *  That  is  the  first  step  upon  which 
the  practical  struggle  must  be  made.  When  the  hare  is  once  caught  and 
killed,  cooking  him  will  follow  as  a  matter  of  course.  When  the  common 
right  to  land  is  so  far  appreciated  that  all  taxes  are  abolished  save  those 
which  fall  upon  rent,  there  is  no  danger  of  much  more  than  is  necessary 
to  induce  them  to  collect  the  public  revenues  being  left  to  individual 
land  holders." 

158 


SERIES   4. 

On  the  Effect  of  the  Untaxing  of  Buildings  Upon  Public  Revenue 

and  Public  Credit. 

1.  It  would  be  introducing  the  Single  Tax  and  would  work  a  pro- 
found change,  not  only  in  our  revenue  system,  but  fundamentally,  as  it 
is  designed  to  do,  in  our  system  of  land  holding.  The  Single  Tax  is 
a  method  of  introducing  social  reform  by  using  taxation  as  a  lever.  All 
scientific  economists  declare  that  taxation,  which  is  "the  enforced  con- 
tribution of  society  for  the  support  of  necessary  government,"  should 
never  be  associated  with  other  matters,  no  matter  how  desirable.  The 
great  and  only  desideratum  is  to  arrange  taxation  to  bear  on  all,  with 
as  even  a  pressure  as  possible. 

2.  Naturally  the  tax  revenue  would  suffer  severely  after  a  short 
time.  The  added  taxation  charge  would  produce  lower  capitalized  land 
values,  calling  for  a  higher  tax  in  order  to  produce  the  taxation  required. 
It  is  a  vicious  circle.  At  what  point,  if  any,  it  would  stabilize  itself  or 
hold  steady,  no  one  can  tell. 

3.  The  present  standard  of  values  would  be  reduced,  making  pres- 
ent tax  assessed  land  values  practically  all  over-assessed.  Increase  of 
assessment  cannot  be  added  beyond  to-day's  practice,  which  is  over 
value.  While  strong-arm  methods  could  be  used,  unfair  practice  always 
reacts  and  the  City  would  have  to  pay  the  price  in  the  end,  which  would 
be  heavy. 

4.  The  law  says  100%.  Never  in  the  history  of  the  City  were  tax 
valuations  higher.  It  is  the  general  opinion  of  most  professional  realty 
men,  that  present  day  assessments  throughout  the  City  are  10%  over 
conservative  valuations.  In  other  words,  real  estate  is  now  tax  valued 
at  110% — an  over-assessment  of  10%.  The  1910  assessment  roll  more 
nearly  represents  current  value  than  the  1911-1915  rolls,  which  were 
openly  padded  in  191 1  to  provide  subways,  and  valuations  have  been 
kept  fairly  rigid  since  to  avoid  grave  financial  trouble. 

5.  Before  1910  they  were  usually  from  one  to  two  years  behind. 
Since  1910  the  Tax  Assessors  have  been  ahead  of  values  and  have  gen- 
erally been  unable  to  see  the  handwriting  on  the  wall. 

6.  The  architect's  rule  of  depreciation  is  2^%  per  annum.  Little 
account  of  this  is  taken  in  the  assessment  rolls.  Improvements  are 
assessed  now  at  least  25%  more  than  their  actual  value.  Indeed,  in  this 
is  where  the  great  overcharge  in  assessment  lies  to-day.  The  land 
value  assessment  is  much  nearer  real  value  than  the  building  assessment 
as  a  rule. 

7.  As  property  is  now  over-assessed,  as  a  rule,  all  speculative  value 
is  more  than  anticipated.  Speculative  possibilities  are  charged  for  in 
advance. 

8.  Yes,  lower  assessment  values  would  come  in  time — gently  when 
you  meet  the  market — with  violence  when  postponed.  Water  finds  its 
level,  so  must  tax  values  in  time. 

No  distinction  between  assessed  value  and  speculative  value  exists 
to-day.  One  who  buys  an  assessed  value  now,  hoping  for  speculative 
profit  later,  will  likely  perish  from  over-optimism. 

9.  The  following  information,  covering  a  specific  period,  has  been 
supplied  to  the  Real  Estate  Board  by  the  Collector  of  Assessments  and 
Arrears.     Taking  the  tax  for   191 1,  this  shows  that  the  Receiver  of 

159 


i;  I 


(; 


Taxes  had  to  collect  as  of  May  ist,  191 1,  $124,845,015.49.  On  the  fol- 
lowing March  i,  1912,  he  returned  as  arrears  $17,774,489.04.  The  amount 
of  this  return  uncollected  on  December  31st,  1912,  was  $6,345,481.09. 
The  amount  of  said  tax  uncollected  on  December  31,  1913,  was  $3,466,- 
885.97,  ^"d  the  amount  of  said  tax  uncollected  on  December  31,  1914, 
was  $2,101,401.49. 

10.  The  City's  credit  and  borrowing  power  are  both  impaired.  If 
the  bonds  could  not  be  sold  (which  must  be  considered,)  any  sale  made 
must  be  at  a  discount  suitable  to  the  estimated  risk  involved. 

11.  Why  not  introduce  Single  Tax  at  once  and  have  done  with  it? 
When  you  palter  with  the  idea,  recognize  it  in  part  and  not  entirely,  you 
encourage  the  effort  of  the  Single  Tax  enthusiasts  to  insist  on  the  whole 
medicine  being  taken,  and  rightfully  so.  Either  they  are  right  or  wrong. 
Real  estate  values,  equities,  mortgages  and  taxation  have  all  been  built 
upon  the  one  principle  of  treating  land  and  buildings  both  alike  as  com- 
ponent parts  of  a  complete  whole.  Separate  them  and  you  open  a  Pan- 
dora's box  of  real  trouble,  but  is  it  not  better  to  have  it  all  with  a  huge 
shock,  than  linger  along  awaiting  the  inevitable  ?  The  Court's  action  can 
never  be  predicted  in  advance.  A  constitutional  debt  limit  is  all  right, 
providing  a  check  is  put  upon  the  spenders.  The  Courts  clearly  failed 
to  do  this  in  1910-1911,  when  it  was  sorely  needed.  It  is  apparently 
neither  the  policy  nor  the  duty  of  the  judiciary  to  check  extravagance 
where  no  manifest  fraud  is  involved. 

12.  We  fail  to  see  how  it  will  remove  the  objections  that  now  lie 
against  the  taxing  of  exempt  property. 

13.  This  is  most  difficult  to  answer.  Untaxing  buildings  promotes 
intensive  building — thereby  congestion  and  the  necessity  for  open  spaces, 
small  parks,  etc.  Consequently,  it  would  apparently  increase  city 
expense. 

14.  Presuming  that  additional  parking  or  open  spaces  equal, 
perhaps,  to  a  10%  greater  area  than  now  required,  the  added  expense 
might  be  hypothetically  determined  as  about  the  same  relative  percent- 
age. 

15.  Congestion  never  yet  meant  less  civic  expense. 

16.  According  to  the  percentage  of  the  shift,  outlying  school 
houses  would  have  more  vacancy  or  be  longer  in  filling  up  and  additional 
school  houses  would  be  required  as  present  or  new  congestion  districts 
developed.  Municipal  buildings  of  all  kinds,  school,  fire  houses  and 
police  stations  would  naturally  follow  suit.     They  always  have. 

17.  The  City's  one  and  only  cUvStomer — in  a  trade  sense — is  the 
taxpayer,  who  pays  96%  of  the  gross  yearly  revenue.  If  his  assets  are 
depreciated,  he  suffers,  but  the  City  does  not  escape.  It  suffers  even 
more,  for  the  underlying  basis  of  its  credit  and  its  bonds  is  being  seri- 
ously undermined. 

As  for  future  borrowing,  the  City  would  not  be  able  to  borrow  with- 
out raising  the  constitutional  limit  to  perhaps  more  than  a  20%  margin, 
instead  of  the  present  10%.  With  less  security  to  the  investor,  city 
bonds  are  less  desirable ;  naturally  they  would  bring  a  lower  price. 

18.  The  evil  effect  would  be  accentuated  as  to  popularity.  No  tax 
is  ever  popular  except  with  those  who  do  not  pay.  The  unpopularity 
of  the  Single  Tax  is  determined  by  the  refusal  of  real  economists  and 
the  voter  heretofore  to  sanction  it.  Enough  of  it  is  known  as  a  demon- 
strated fact  to  make  all  real  estate  men  disbelievers  in  its  alleged  virtues. 

19.  If  all  the  tax  was  on  the  land  value,  what  is  that  but  Single 

160 


Tax?  There  is  no  "obstacle"  then — it  is  Single  Tax.  Then  all  that 
is  needed  in  the  absorption  process  is  to  make  land  a  public  utility  and 
not  a  private  holding.  All  of  which  the  increasing  expenses  of  govern- 
ment through  socialization  earnestly,  if  unconsciously,  tend  to  do. 


SERIES   5. 

On  the  Effect  of  the  Untaxing  of  Buildings  Upon  Mortgage  Loans. 

1.  It  is  impossible  to  tell  to  just  what  extent  the  security  would  be 
reduced.  Taxes  ultimately  would  be  higher,  and  it  is  reasonable  to  as- 
sume that  the  security  would  be  reduced. 

2.  To  a  greater  extent  than  a  parcel  appropriately  improved. 

3.  It  would  in  a  great  number  of  cases  practically  confiscate  the 
value. 

4.  It  is  estimated  that  about  50%  of  the  assessed  value  of  all  land 
in  the  City  of  New  York  is  covered  by  first  mortgages.  The  proportion 
covered  by  second  and  third  mortgages,  as  far  as  we  know,  has  never 
been  estimated. 

5.  It  depends  largely  upon  the  character  of  the  improvement. 
Generally  speaking,  from  50%  to  662/3%. 

6.  It  depends  entirely  on  the  character  of  the  improvement.  Such 
loans  are  difficult  and  almost  impossible  to  secure.  Savings  banks  are 
restricted  by  law  to  40%  of  their  market  value. 

7.  We  know  of  no  way  to  fix  the  proportion.  The  result  of  any 
attempt  to  fix  the  proportion  would,  at  best,  be  a  wild  guess. 

8.  We  know  of  no  way  to  fix  the  proportion. 

9.  It  depends  entirely  on  the  improvement. 

ID.  It  is  difficult  and  in  many  cases  impossible  to  obtain  second 
mortgages   on   inappropriately   or   unimproved    land. 

11.  It  is  impossible  to  answer  this  question.  To  do  so  intelligently 
would  require  an  appraisal  of  each  individual  parcel  in  the  city.  Fore- 
closure records  are,  perhaps,  the  best  guide  to  answering  this  question. 

12.  This  question  is  too  general  to  answer  intelligently.  It  would, 
in  any  event,  reduce  the  borrowing  capacity  of  real  estate  far  beyond 
the  ratio  which  the  reduction  in  value  bears  to  the  entire  value  of  the 
property  since  it  would  unsettle  confidence  in  real  estate  as  a  security. 

13.  Any  untaxing  of  buildings,  without  regard  to  the  percentage — 
the  fact  that  the  theory  was  adopted — would  cause  general  foreclosing. 

14.  The  ultimate  effect  would  be  to  turn  most  of  the  mortgage 
money,  if  not  all,  out  of  the  City,  as  the  consequent  hazard  would  result 
in  a  rate  in  excess  of  6  per  cent.,  which  would  be  usurious.  If  new  loans 
could  be  obtained  at  all  they  would  be  smaller  in  amount  and  at  a  higher 
rate  of  interest. 

Respectfully  submitted, 

REAL  ESTATE  BOARD  OF  NEW  YORK. 
(Signed)     DAVID  A.  CLARKSON, 
Chairman  Sub-Committee  Legislation  and  Taxation. 


161 


II 


li 


ANSWERS  TO  QUESTIONS  SUBMITTED  BY  MR.  STEWART 

BROWNE,  PRESIDENT  UNITED  REAL  ESTATE 

OWNERS'  ASSOCIATION. 


SERIES    I. 


The  Effect  of  the  Untaxing  of  Buildings  Upon  Land  Values  and  Upon 

Speculation  in  Land. 

I.  The  1873  panic  decreased  realty  values  until  1886;  from  i88fi 
to  1892  they  increased;  the  1893  panic  forced  a  decrease  until  1900. 
These  decreases  and  increases  in  value  were  pretty  general  all  over  the 
city.  The  building  of  the  elevated  railroads  and  their  extensions  some- 
what shifted  values  by  increasing  the  values  of  the  outlying  sections  and 
decreasing  values  in  certain  central  sections. 

The  Spanish-American  War  unduly  expanded  our  credit  situation, 
and  its  close  brought  hundreds  of  millions  of  European  capital  into  this 
country  for  new  development  purposes,  and  New  York  realty  received 
a  large  benefit  from  this.  Free  mortgage  lending,  large  purchase  money, 
second  and  third  mortgages  and  trades,  between  1900  and  1907,  brought 
an  era  of  tremendous  realty  improvement  and  expansion  throughout 
Greater  New  York. 

The  extension  of  the  subways  enormously  increased  the  values  of 
outlying  sections,  and  the  use  of  skeleton  steel  construction  increased 
values  in  the  center  of  the  city  by  ability  to  build  skywards,  but  de- 
creased adjoining  values,  which  latter  is  not  yet  fully  recognized. 

When  Europe  stopped  supplying  us  with  credit  in  1907  there  was  a 
financial  panic,  after  which  came  the  Wilson  Tariff  Bill ;  these  curtailed 
the  industries  of  the  country  and  brought  all  values  and  incomes  down 
to  hard  pan. 

The  talk  of  single  taxers,  of  building  exempt  taxers.  increasing 
municipal  taxes  and  general  reduction  in  values  from  above  causes 
brought  about  the  calling  of  mortgage  loans,  with  the  final  result  that 
the  present  condition  of  real  estate  is  worse  than  it  has  ever  been  in  its 

history. 

History  shows  that  no  matter  what  declines  take  place  in  realty 
values  in  any  city  or  country,  it  is  only  a  question  of  time  when  the 
trend  will  be  upward  and  beyond  any  previous  average  high  level.  There 
are,  of  course,  individual  values  that  will  never  go  back,  and  some  sec- 
tions to-day  are  lower  than  they  were  fifty  years  ago. 

2.  (a)  As  a  whole,  a  decrease  rather  than  an  increase  may  be  ex- 
pected during  the  next  five  years;  (b)  first  a  speculative  increase,  then 
a  decrease ;  (c)  as  a  whole,  100%  for  the  next  seven  years. 

3.  (a)  For  present  purposes,  as  a  whole,  an  excess  of  improvement ; 
(b)  during  the  past  ten  years  fully  95%  is  fully  improved  faster  than 
the  demand ;  hence  from  demand  standpoint  practically  none  is  inap- 
propriately improved ;   (c)   in  area  60%. 

162 


4.  (a)  My  process  of  reasoning  can't  differentiate  between  a  sep- 
arate tax  on  land  and  on  building  of  urban  fully  improved  property; 
both  land  and  buildings  are  merged  in  one.  If  the  gross  tax  is  the  same, 
it  is  immaterial  whether  it  be  wholly  on  land  or  wholly  on  building — 
and  if  other  factors  remain  constant,  the  gross  value  remains  the  same, 
irrespective  of  any  division  of  value  the  tax  department  may  place  upon 
it.  The  trouble  is  the  other  factors  won't  remain  constant  under  such  a 
change,  but  what  effect  such  other  factors  may  have,  one  man's  guess  is 
as  bad  as  another's,  (b)  Example  depends  upon  the  resultant  tax  on 
land,  whether  for  own  occupancy  or  rental  and,  if  latter,  the  resultant 
effect  on  rents. 

If  the  gross  tax  remains  the  same  and  rentals  the  same,  there  is  no 
change  in  value ;  if  the  gross  tax  is  reduced  and  rentals  remain  the  same, 
the  value  is  increased ;  if  the  gross  tax  is  reduced  and  rentals  are  reduced 
equal  to  tax  reduction,  there's  no  change  in  value;  if  the  gross  tax  is 
increased  and  rentals  remain  the  same  the  value  is  decreased;  if  the 
gross  tax  is  increased  and  rentals  are  increased  equal  to  the  tax  reduc- 
tion, the  value  remains  the  same. 

5.  Between  twenty  and  thirty  years. 

6.  (a)  So-called  expert  appraisers  use  different  rules;  some  allow 
100%  of  such  results,  some  75%  and  some  50%  ;  the  aggregate  value 
depends  largely  whether  'tis  for  sale,  loan  or  tax  purposes.  Traders 
and  speculators  have  rules  of  their  own  that  differ  from  expert  ap- 
praisers; (b)  depends  upon  whether  the  appraisal  is  for  sale,  loan  or 
tax  purposes,  and  whether  made  by  expert  appraiser,  trader  or  specu- 
lator. 

7.  (a)  Every  building  is  really  a  taxpayer,  whether  it  be  underim- 
proved,  fully  improved  or  overimproved ;  no  improvements  are  actually 
permanent,  nor  will  they  be  unless  there  is  building  height  limitation; 
(b)  temporary  "taxpayers"  values  don't  exceed  5%  of  the  aggregate  im- 
provement values. 

8.  (a)  First,  population;  next,  capital  borrowed  or  owned  or  both 
taking  the  speculative  chance  of  supplying  prospective  demand ;  lastly, 
developers  speculatively  furnishing  the  supply  and  actually  forcing  the 
demand  to  come  to  the  supply ;  (b)  increase  in  a  nation's  price  level  in- 
creases property  values  also ;  (c)  increase  in  wealth  (including  credit 
in  wealth)  is  one  of  the  principal  factors  entering  into  "price  level"  and 
values. 

9.  (a)  Central  improved  values  might  decrease  or  increase,  de- 
pending upon  other  factors  foreseeable  and  unforeseeable ;  (b)  central 
vacant  land  values  would  probably  decrease  50%  and  outlying  vacant 
land  values  would  probably  decrease  75%  to  90%.  Outlying  improved 
properties  would  probably  decrease  about  50%. 

10.  (a)  There  probably  will  never  be  an  increase  in  rentals  in 
existing  underimproved  properties  for  like  occupancy;  (b)  in  existing 
fully  improved  property,  an  increase  in  rentals  can  only  come  from  in- 
crease in  price  level  or  increase  in  population,  or  the  demand  overtaking 
the  supply.  Such  increase  in  rentals  will  not  happen  for  between  five 
and  seven  years;  (c)  present  assessed  values  represent  a  capitalization 
of  25%  excess  annual  rent. 

11.  Immaterial  as  long  as  values  are  normal ;  high  values  must  exist 
in  large  progressive  cities.  Falling  values  are  always  detrimental  to  a 
state  or  city. 

163 


■ 


12.  go%  speculative  and  for  resale,  whether  for  improvement  or 
otherwise. 

13.  (a)  Force  selling,  reduce  buying,  present  vacant  land  values 
would  fall  50%  to  75% ;  (b)  the  effect  on  improved  property  would  de- 
pend upon  whether  the  resultant  gross  tax  was  increased  or  decreased 
and  upon  the  resultant  future  rentals. 

14.  (a)  Disastrous  to  the  sellers ;  (b)  if  all  other  factors  remained 
constant,  which  they  won't,  it  would  be  beneficial  to  the  buyer  for  im- 
provement and  occupancy  in  reducing  the  purchase  price ;  (c)  have  no 
effect  on  the  community  generally,  if  all  other  factors  remained  constant, 
which  they  won't;  "by  and  large"  the  general  effect  would  be  bad, 
but  time  would  efface  them. 

15.  (a)  Man's  life  and  all  his  activities  from  the  cradle  to  the 
grave  are  speculative;  when  time  emerges,  speculation  is  born;  (b) 
75%  good,  25%  bad ;  (c)  stock  and  produce  exchange  speculation  steadies 
prices  and  makes  a  market,  realty  speculation  builds  up  a  community. 

16.  Not  5%  ;  supply  has  always  been  faster  than  demand. 

17.  Nothing  in  the  universe  can  be  stabilized  or  remain  constant: 
nothing  checks  speculation  in  securities  or  realty  so  much  as  inability  to 
borrow  or  borrow  freely.  Building  exempt  taxation  or  "uncashed  prop- 
erty increment  tax"  would  only  produce  chaos  in  values;  "cashed  in 
increment  property  tax"  would  have  no  such  effect,  because  it  would 
be  a  tax  realized  on  profit  and  not  a  tax  on  "illusions." 

18.  One  factor  acting  produces  certain  results ;  increase  the  num- 
ber of  factors  and  the  effects  become  compound.  "  'Tis  the  last  straw 
that  breaks  the  camel's  back." 

19.  (a)  Lenders  are  properly  laws  unto  themselves ;  capital  or 
credit  is  the  most  timid  thing  in  our  civilization ;  'tis  like  the  wind,  it 
comes  from  nowhere  and  disappears  nowhere;  it  would  be  most  dis- 
astrous. American  value  of  securities  and  realty  is  borrowing  value ; 
kill  credit  and  you  kill  values,  (b)  With  such  a  radical  change  the 
static  effects  on  individual  cases  has  no  bearing ;  the  effect  is  on  realty  as 
a  whole,  which  reacts  back  on  individual  cases. 

20.  80%  of  owners  own  one  parcel. 

21.  The  principal  holders  of  mortgages  are  life  insurance  com- 
panies, savings  banks,  trust  companies,  estates  and  title  guarantee  com- 
panies ;  the  ultimate  beneficiaries  of  the  first  are  represented  by  policy- 
holders averaging  $2,000  each  per  policy  and  the  second  by  the  lower 
middle  and  lower  classes;  the  third  by  estates  and  the  fourth  by  small 
holders  of  their  guaranteed  mortgages.  There  are  very  few  indiviual 
lenders  holding  a  number  of  mortgages. 

22.  Would  staticly  decrease  the  taxes  of  some  and  staticly  increase 
the  taxes  of  others,  the  percentage  depending  upon  the  relative  existing 
assessed  values  of  land  and  building;  on  the  other  hand  the  land  tax 
might  require  to  be  so  increased  that  there  might  be  no  decrease  but  an 
increase  tax  on  both.  Unless  some  land  assessed  values  were  increased, 
and  some  decreased,  would  produce  inequalities  of  taxation  between 
"skyscraper"  owners. 

23.  There  are  no  such  small  house  owners  in  Manhattan  as  there 
are  in  Brooklyn. 

24.  (a)  Depend  upon  the  relative  assessed  values  of  land  and  build- 
ing and  the  resultant  gross  tax;  (b)  would  vary. 

25.  Depends  entirely  upon  the  relative  assessed  values  of  land  and 
building  of  each  such  class  of  owners  and  the  resultant  gross  tax;  in- 

164 


\** 


ft 


dividual  cases  would  require  to  be  investigated  and  then  grouped. 

26.     The  general  result  can  be  predicted  fairly  well  from  a  by  and 
large  standpoint,  but  not  minutely. 


SERIES    2. 

The  Effect  of  the  Untaxing  of  Buildings  Upon  Building  Operations, 

Housing  Conditions  and  Congestion. 

1.  (a)  As  regards  vacant  land  (90%  of  which  is  held  for  rise  in 
values  or  rental  improvement),  it  would  decrease  new  building  erection; 
it  might  increase  for  owner's  occupancy,  provided  the  same  mortgage 
loan  could  be  obtained  and  that  the  resultant  land  tax  was  one-half  of 
the  present  gross  tax;  but  the  resultant  land  tax  might  equal  or  even 
exceed  the  present  gross  tax ;  (b)  improvements  are  caused  by  "demand' 
and  in  spite  of  taxation  and  not  because  of  it. 

2.  Would  discourage. 

3.  Not  of  itself;  only  demand  will  do  that. 

4.  If  it  forced  "new  building,"  it  would  increase  "building  height,' 
unless  the  latter  was  limited  by  law. 

5.  (a)  Closest  to  the  centre  of  population  and  then  spreading  out 
therefrom;   (b)   don't  understand  the  last  question. 

6.  (a)  Overdevelopment  is  a  matter  of  opinion  and  appropriateness 
is  not  a  static  condition ;  (b)  highest  values  are  closest  to  population 
congestion,  and  if  new  building  erection  is  forced,  building  height  would 
be  increased,  commencing  with  the  central  location  and  then  spreading 
out. 

7.  If  it  forced  new  building  erection,  this  would  be  the  inevitable 
result. 

8.  It  would  have  a  decided  tendency  to  build  up  existing  breathing 
spaces. 

9.  If  there  was  a  prospective  demand  for  tenants  and  a  full  mort- 
gage loan  could  be  secured,  the  higher  the  building  for  rental  would  go 
up  and,  within  certain  limits,  likewise  for  owner's  occupancy. 

10.  Depends  upon  the  "fads  and  fancies"  of  the  city  administra- 
tion and  the  "taxpaying  ability"  of  the  people. 

11.  If  bonds  issued,  to  the  extent  of  sinking  fund,  plus  interest  on 
same. 

12.  (a)  Equally  good  arguments  can  be  made  pro  and  con  on  height 
limitation,  irrespective  of  "building  exempt  taxation";  (b)  population 
congestion  increases  rents,  but  increases  workers'  efficiency,  and  time; 
(c)  depends  on  what  result  is  wanted  before  one  can  say  whether  it 
increases  the  necessity  for  "height  limitations";  (d)  after. 

13.  (a)  Discourage;  (b)  extremely  bad;  (c)  such  owners  are 
heroes,  but  the  mob  calls  them  "hogs." 

14.  Have  no  such  effect. 

15.  (a)  Assumption  is  wrong;  (b)  certainly,  for  same  occupancy. 

16.  Don't  believe  would  change  present  practices. 

17.  Certainly. 

18.  The  land  value  is  decreased,  but  the  tax  is  increased.  Where 
an  existing  owner  was  forced  to  build,  he  would  economize  in  lawn  and 
garden ;  where  he  was  forced  to  sell,  the  reduced  purchase  price  would 
more  than  offset  the  increased  taxes,  and  the  tendency  would  be  to  con- 


165 


I 

1 

c  . 

Il 


tinue  or  even  increase  lawn  and  garden ;  such  would  continue  until  popu- 
lation congestion  overtook  the  location. 

19.  (a)  Vacancies ;  (b)  restricts  or  prevents  loans ;  (c)  nothing  more 
so. 

20.  Few  buildings  are  wholly  vacant,  but  fully  one-third  of  the 
aggregate  floor  area  is  unoccupied. 

21.  75%  suitable;  25%  partially  so;  all  can  be  made  suitable  for 
some  occupancy. 

22.  (a)  No;  (b)  if  the  occupancy  environment  has  not  changed, 
it  forces  rebuilding ;  if  the  occupancy  environment  has  changed  it  forces 
alterations  and  repairs. 

23.  (a)  No ;  (b)  when  loans  could  not  be  secured ;  (c)  nothing  be- 
gins or  cnecks  itself. 

24.  Don't  know;  they  can  be  a  law  unto  themselves;  ask  them. 
25.^    City  planning  may  be  good  or  bad  depending  upon  the  "final 

object,"  and  whether  those  "in  favor"  can  force  their  views;  the  pos- 
sible further  effect  depends  upon  the  viewpoint.  If  excessive  height  be 
bad,  then  building  exemption,  if  it  forced  new  building,  would  make 
it  worse. 

26.  (a)  Would  have  no  effect  in  attracting  population  from  out- 
side city;  (b)  so  many  other  factors  to  consider  that  I  can't  answer  this. 

2y.  Materially  increases  these  problems,  as  would  intensify  location 
population  congestion. 


SERIES   3. 

The  Effect  of  the  Untaxing  of  Buildings  Upon  Rent. 

1.  (a)  No  ground  rents  but  leaseholds;  (b)  under  5%. 

2.  Dwellings  100%;  hotels  100%;  lofts  15%;  factories  (not  loft 
buildings)    75%. 

3-  (a)  I,  3>  5»  7  and  10  years;  mostly  between  i  and  3  years;  (b) 
90%  assumed  by  landlord. 

4.  Apartment  houses  and  hotels  100% ;  office  buildings  100%  ;  tene- 
ments 100%;  hotels  (to  guests  and  tenants)  100% ;  loft  buildings  85%; 
factories  25%. 

5.  (a)  Improvements,  99%  paid  by  landlord;  (b)  maintenance, 
100%  paid  by  landlord. 

6.  Landlord  assumes  all  except  lighting,  which  latter  is  assumed 
by  landlord  in  a  few  cases. 

7.  Only  one  element — get  all  you  can. 

8.  The  landlord  doesn't  collect  a  ground  rent  for  location  or  for 
anything  else;  this  is  a  fiction  of  theorists;  he  collects  a  rent  for  certain 
floor  area;  he  receives  certain  rent  and  the  tenant  pays  certain  rent;  a 
hundred  and  one  different  elements  may  enter  into  such  rent  by  both 
parties;  but  for  anybody  to  try  and  put  a  value  on  any  of  these  ele- 
ments, let  alone  be  conscious  of  what  they  are,  is  preposterous. 

9.  (a)  He  doesn't;  (b)  if  he  paid  no  more  gross  tax  and  such  tax 
was  shifted,  calling  it  a  tax  on  the  building,  a  tax  on  the  land,  a  tax  on 
the  plant,  a  tax  on  the  windows  or  a  tax  on  the  owner's  body  would  not 
change  conditions. 

10.  Theory  again;  the  question  is  preposterous;  you  might  as 
well  ask  what  value  I  put  on  the  constituent  parts  of  a  twenty-dollar  gold 

166 


piece  when  I  take  it  or  pay  it  out  in  exchange  for  another  commodity. 
The  tax  is  considered  as  a  whole  and  is  supposed  to  be  shifted  to  the 
tenant;  but  the  increased  taxes  during  the  past  eight  years  have  not 
been  so  shifted  as  the  supply  of  space  exceeds  the  demand. 

11.  (a)  Until  lately  so-called  land  values  kept  increasing  much 
faster  than  building  depreciation  from  any  cause,  but  the  latter  was 
never  considered ;  now  owners  are  forced  to  realize  that  building  de- 
preciation (not  necessarily  physical)  is  actual  and  land  appreciation  is 
largely  illusory;  (b)  never  considered. 

12.  Neither  owners  nor  tenants  keep  psychological  tabs  on  their 
emotional  explosions,  brain  emanations  or  reflex  actions ;  the  landlord 
gets  all  the  rent  he  can  for  any  old  reason  or  reasons  and  the  tenant 
pays  as  little  as  he  can  for  like  reasons.    Rents  are  not  factory  products. 

13.  (a)  If  there  was  no  "oversupply"  there  would  be  no  reduction 
in  rents ;  (b)  if  there  was  an  oversupply,  it  would  reduce  all  rents,  and 
older  buildings  more  so  than  newer  ones. 

14.  (a)  It  would  not  bring  factories  and  stores  from  outside  the 
city;  (b)  I  don't  believe  dwellings  rents  could  be  so  reduced  in  New 
York  as  to  bring  tenants  from  outside  the  State  or  outlying  suburbs; 
contiguousness  and  "time"  to  occupations  would  be  the  determining 
factor;  (c)  strength  of  supply  and  strength  of  demand  always  react  on 
or  check  one  another. 

15.  Psychological  conundrum. 

16.  Not  from  such  cause ;  any  result  is  possible  in  life  if  the  neces- 
sary causes  exist. 

17.  (a)  Friction  exists  everywhere  and  in  everything;  (b)  landlords 
reduce  rents  when  compelled  to  and  not  otherwise,  which  is  active  re- 
sistance ;  (c)  If  "mobility"  means  shiftability  to  secure  some  advantage 
financial  or  otherwise,  I  can  understand  it  having  a  retarding  effect  on 
increase  in  rents,  but  not  on  a  decrease  in  rents. 

18.  (a)  High  wages  produce  a  high  price  level  and  a  high  price 
level  produces  high  wages;  cause  and  effect  seem  interwoven;  but  it 
takes  time  for  each  to  overtake  the  other.  Labor  unions  have  discov- 
ered this;  therefore  per  diem  "union  wages"  are  slightly  ahead  of  rising 
prices,  and  behind  falling  prices. 

19.  (a)  There  is  no  such  thing  as  high  rents  and  high  realty  values; 
these  terms  are  relative;  (b)  rents  and  realty  values  follow  the  "price 
level"  and  the  latter  is  composed  of  a  million  and  one  factors  acting  and 
reacting  on  one  another;  where  wages  are  high  rents  are  high,  where 
wages  are  low  rents  are  low. 

20.  (a)  Tenants  no  more  pay  taxes  than  they  pay  wages,  salaries, 
interest  and  other  charges  that  enter  into  the  cost  of  producing  and 
selling  any  product ;  they  have  and  take  no  interest  in  the  cost  of  gov- 
ernment;  (b)  it  wouldn't  change  the  present  conditions;  (c)  "Repre- 
sentation  without  Taxation"  is  a  thousand  times  more  destructive  to 
good  government  than  "Taxation  without  Representation." 

SERIES   4. 

The  Effect  of  the  Untaxing  of  Buildings  Upon  Public  Revenue  aind 

Public  Credit. 

I.     (a)  On  fully  improved  property,  no;  (b)  on  partially  improved 
property,  sometimes;  (c)  on  vacant  land,  yes. 

167 


I.i; 


2.     Certainly. 

3-  It  would,  provided  owners  didn^t  force  a  reduction  in  assessed 
valuations  by  court  proceedings  or  otherwise. 

4.  120%  on  the  average. 

5.  Ahead  of  increase  in  values  and  long  way  behind  decrease  in 
values. 

6  Has  no  bearing,  as  50%  of  Manhattan's  buildings  would  not  be 
reproduced. 

7.  120%. 

8.  (a)  It  would  necessarily  result  in  lower  actual  values,  but  as- 
sessment values  would  not  be  lower  until  forced ;  (b)  assessed  values 
12070  of  selling  speculative  values. 

9.  (a)  15%;  (b)  10%;  (c)  5%. 

ID.  It  ought  to  and  would  seriously  interfere  with  their  sale  if  the 
realty  owners  exposed  as  they  would  the  actual  conditions. 

11.  The  courts  would  hold  that  such  violated  the  Constitution  •  but 
the  same  result  could  be  obtained  by  making  the  tax  rate  on  buildings 
i/iooth  of  1%.  '^ 

12.  Why  should  it?    They  would  still  be  exempt 

13.  Would  not  reduce  and  might  increase  as  the  city  is  already 
committed:  to  public  improvements  for  an  area  twice  the  necessary  area  • 
would  increase  the  cost  of  social  uplift  "fads  and  fancies." 

14.  Same  answer  as  to  No.  13. 

15.  Less  expenditure  if  city's  area  had  been  limited  ten  years  age- 
would  have  no  effect  now  unless  city's  area  be  further  extended,  which 
would  mean  more  expenditures;  for  instance,  the  aggregate  length  of 
improved  streets  in  Queens  exceeds  those  of  Manhattan;  would  increase 
cost  of  social  uplift  fads  and  fancies. 

16.  Not  any  more  than  at  present. 

17.  Its  borrowing  ability  is  limited  by  its  legal  debt  limit;  its 
ability  to  borrow  would  depend  entirely  upon  other  sources  of  revenue ; 
the  aggregate  realty  tax  collected  would  be  fully  25%  less  than  now; 
that  would  kill  the  city's  credit ;  but  if  other  sources  of  revenue  raised 
more  than  the  25%  realty  reduction,  the  city's  credit  might  be  improved. 

18.  Accentuate  it,  of  course. 

19.  It  would  mean  the  start  of  the  so-called  Single  Tax;  but  the 
pure  Single  Tax  has  never  been  adopted  anywhere  and  couldn't  be 
adopted  in  the  United  States;  the  so-called  Single  Taxers  are  not  Single 
Taxers  and  don't  know  what  the  Single  Tax  really  is;  further,  I  take 
entire  exception  to  the  theory  that  a  tax  on  fully  improved  urban  land 
can't  be  shifted  to  the  tenant ;  it  can't  in  theory,  but  it  can  in  practice, 
because  the  other  factors  are  never  fixed  or  constant. 


SERIES    5. 


The  Effect  of  the  Untaxing  of  Buildings  Upon  Mortgage  Loans. 

1.  The  immediate  result  would  be  to  reduce  loan  values  by;  a  sum 
equal  to  capitalized  value  of  the  increased  tax,  plus  an  unknown  psycho- 
logical addition;  this  result  would  be  modified  when  the  increased  tax 
commenced  and  continued  to  shift  on  to  the  tenant. 

2.  Same  answer  as  given  to  No.  i. 
3-    75%- 

168 


4.  (a)  90% ;  (b)  50% ;  (c)  15%. 

5.  Two-thirds  of  full  appraised  value. 

6.  50%  to  60%,  depending  upon  bondsman. 

7.  Hard  to  get;  25%  to  50%,  depending  upon  bondsman,  rate  of 
interest  and  commission. 

8.  Depends  upon  interest  rate,  commission  and  bondsman ;  might 
go  as  high  as  100%.    Purchase  money  second  mortgages  up  to  100%. 

9.  Same  answer  as  to  No.  8. 

10.  Practically  none,  except  in  cases  of  purchase  money  second 
mortgages,  and  then  up  to  95%  or  higher. 

11.  (a)  85%-io%  and  less,  under  normal  conditions;  (b)  under 
present  conditions  have  little,  if  any  equity  above  mortgage;  (c)  can't 
give  percentages  between  20%  and  50%,  but  very  small. 

12.  Depends  upon  the  psychology  of  the  lender;  for  the  first  few 
years  until  conditions  had  equilibriumized  themselves ;  should  say  would 
reduce  it  25%  to  50% ;  at  first  might  be  much  more  than  the  capitalized 
value  of  the  increased  tax. 

13.  It  would  result  in  reducing  loans  from  25%  to  50%  in  one 
payment  or  spread  over,  depending  upon  the  equity  and  the  finances 
of  the  borrower  and  whether  on  bond  or  not;  the  lender  would  force 
reductions  in  loans  where  he  could  and  would  foreclose  if  he  thought 
he  could  obtain  a  purchaser  for  amount  of  loan,  or  if  not,  he  might  be 
willing  to  take  a  loss ;  most  equities  are  small,  and  where  so,  most  own- 
ers would  give  deeds  in  preference  to  reducing  loans  and  take  chances 
of  suit  on  bond  if  on  it ;  it  would  be  a  game  of  "bluff"  between  borrower 
and  lender,  or  a  complete  "lying  down"  on  the  part  of  the  "weakling" 
owners. 

14.  It  would  decrease  loan  amounts  and  increase  interest  rates. 


169 


I 


I 


INFORMATION  SUPPLIED  BY  HON.  JOHN  J.  HOPPER,  REGIS- 
TER OF  THE  COUNTY  OF  NEW  YORK,  FROM  DATA  IN 
HIS  OFFICE,  IN  ANSWER  TO  CERTAIN  OF  THE  QUES- 
TIONS CONTAINED  IN  THE  LIST  OF  QUESTIONS 
TO  BE  CONSIDERED  IN  CONNECTION  WITH 
PUBLIC   HEARINGS,   PREPARED   BY   THE 

COMMITTEE. 


QUESTION  SERIES  3. 
On  the  Effect  of  the  Untaxing  of  Buildings  Upon  Rent. 

I.  To  enumerate  each  instance  in  New  York  County  (Manhattan) 
where  the  land  is  owned  by  one  person  and  leased  to  another  person 
who  owns  the  improvements  would  needlessly  encumber  the  record. 
Trinity  Church,  Columbia  College,  Sailors'  Snug  Harbor,  New  York 
Hospital,  and  famihes,  such  as  the  Astors,  Rhinelanders,  Stuyvesants, 
Moores,  Lorillards,  Lispenards,  Spinglers,  and  others  may  be  men- 
tioned among  those  owning  land  leased  on  a  pure  ground  rent  basis. 
The  leases  are  usually  for  twenty-one  years  with  provision  for  one,  two 
or  three  renewals.  As  a  rule  the  lessee  pays  all  the  taxes.  The  result  of 
this  provision  is  that  the  land  owner  under  such  leases  is  protected  from 
any  change  in  the  land  tax  laws  or  increase  in  the  land  tax  rate.  His 
rent  is  reserved  free  and  clear  above  all  charges  of  maintenance,  both 
public  and  private,  since  all  building  charges,  as  well  as  all  land  tax 
charges  for  government  maintenance,  must  be  found  and  paid  by  the 
lessee. 

Following  are  some  specific  examples  of  pure  ground  rent  leases 
as  disclosed  in  the  records  of  the  Register's  Office: 

(i).  LOCATION:  Bankers'  Trust  Building,  northwest  corner 
Wall  and  Nassau  Streets — Lots  17,  19,  20—  Block  46,  Section  i ; 

OWNER  OF  LAND:     Adele  Livingston  Sampson; 

OWNER  OF  BUILDING  (LESSEE  OF  LAND)  :  Bankers*  Trust 
Company,  July  17,  1909,  Liber  125,  Page  116,  Section  i; 

ASSESSED  VALUE  OF  LAND:  191 5,  $3,200,000;  improvement. 
31-story  steel  frame  fireproof  office  building. 

ASSESSED  VALUE  OF  BUILDING:    1915,  $2,600,000. 

ANNUAL  GROUND  RENT :  ist  year,  $50,000.  2nd  year,  $80,000. 
3rd  year  and  balance  of  the  term,  $90,000; 

TERMS  OF  LEASES  AND  OTHER  INFORMATION:  Term, 
21  years  and  two  renewals,  rent  or  renewal  to  be  fixed  by  appraisers,  but 
not  less  than  $90,000;  ^ 

Building  reverts  to  land  owner  at  end  of  third  term  without  com- 
pensation ; 

170 


Lessee  to  pay  all  taxes  and  similar  charges ; 

(2).     LOCATION:     Postal  Telegraph  Building,  northwest  corner 
Broadway  and  Murray  Street,  Lot  29,  Block  134,  Section  i ; 

OWNER  OF  LAND:    Rector,  Church  Wardens  and  Vestrymen  of 
Trinity  Church; 

OWNER  OF  BUILDING   (LESSEE  OF    LAND):      John    W. 
Mackay,  March  23,  1892,  Liber  8,  Page  168,  Section  i ; 
ASSESSED  VALUE  OF  LAND:     1915,  $1,025,000; 
ASSESSED  VALUE  OF  BUILDING:     1915,  $900,000; 
ANNUAL  GROUND  RENT:    ist  year,  $17,500.   2nd  year,  $24,000. 
3rd  year,  $52,500.     Renewal:    21  years  at  $52,500; 

TERMS  OF  LEASES  AND  OTHER  INFORMATION:  3  years, 
from  May  i,  1892,  with  renewal  for  21  years,  at  $52,500  rent. 

Second  and  third  renewal,  rent  not  less  than  immediately  preceding 
period  to  be  fixed  by  appraisement. 

At  end  of  third  renewal,  lessor  may  pay  lessee  value  of  building 
or  grant  further  renewal  for  21  and  13  years  (a  total  of  100  years), 
building  then  reverts  to  lessor. 

(3).  LOCATION:  Wanamaker  Buildings— East  side  of  Broad- 
way, between  8th  and  loth  Streets  and  a  small  plot  on  Fourth  Avenue, 
north  of  loth  Street; 

OWNER  OF  LAND:    Sailors'  Snug  Harbor; 
OWNER  OF  BUILDING  (LESSEE  OF  LAND) :    A.  T.  Stewart 
Realty  Co.    Owned  and  controlled  by  John  Wanamaker ;  April  30,  1903 ; 
Liber  113,  Page  328;  Section  2; 

ASSESSED  VALUE  OF  LAND:  1915,  Parcel  i,  $1,830,000;  Par- 
cel 2,  $1,615,000;  Parcel  3,  $95,000;  Total  $3,540,000. 

ASSESSED  VALUE  OF  BUILDING:  1915— Parcel  i,  $4,625,000; 
Parcel  2,  $2,000,000;  Parcel  3,  $105,000;  Total  $6,730,000; 

ANNUAL  GROUND  RENT:  ist  7  years,  $83,400;  Balance  of 
term,  $113,620;  Renewal  21  years  at  3%  upon  full  value  of  the  land; 

TERMS  OF  LEASES  AND  OTHER  INFORMATION :    91  years 
from  May  i,  1903,  with  renewal  for  21  years  at  annual  ground  rent  of 
3%  upon  full  value  of  the  land  to  be  determined  by  appraisers,  etc. 
Lessee  to  pay  all  taxes  and  similar  charges; 

Lessee  to  erect  14-story  building  to  cover  one  of  the  parcels  and 
at  expiration  of  lease,  lessor  was  to  have  option  of  paying  the  lessee 
the  value  of  building  or  to  grant  renewal  as  above ; 

(3a).     LOCATION:     Northeast  corner  of  Ninth  Avenue  and  22nd 

Street,  24  ft.  8  in.  x  78  ft. 

OWNER  OF  LAND:     Clement  C.  Moore  Estate.  Katherine  T. 

Moore,  an  heir; 

OWNER  OF  BUILDING  (LESSEE  OF  LAND):  Ella  Grace 
Lamb— January  i,  1914— Liber  192,  Page  417,  Section  3; 

ASSESSED  VALUE  OF  LAND:     1915,  $17,000. 

ASSESSED  VALUE  OF  BUILDING:    1915,  $7,ooo; 

ANNUAL  GROUND  RENT:    $900. 

TERMS  OF  LEASES  AND  OTHER  INFORMATION:  21  years, 
from  January  i,  1914,  at  $900  yearly,  with  an  option  of  buying  the  build- 
ings at  the  end  of  the  term  or  giving  a  renewal  of  the  lease. 

(4).  LOCATION:  Northwest  corner  of  50th  Street  and  Fifth 
Avenue;  (123  x  35  ft.  5  in.)  irregular;  Lot  34,  Block  1266,  Section  5;^ 

North  side  50th  Street,  123  ft.  west  of  Fifth  Avenue  41  x  100  ft.  5  in. 
irregular — ^Lot  31,  Block  1266,  Section  5; 

171 


i 


i 


. 


m 


' 


OWNER  OF  LAND:     Trustees  of  Columbia  College; 

OWNER  OF  BUILDING  (LESSEE  OF  LAND):  Walter  S. 
Gurnee,  October  24,  1888;  Liber  in,  Page  103,  Section  5;  Assigned  to 
Benjamin  Altman; 

William  P.  Clyde,  Assigned  to  Benjamin  Altman ; 

ASSESSED  VALUE  OF  LAND:     1915,  $710,000;  1915,  $110,000; 

ASSESSED  VALUE  OF  BUILDING:  1915,  $60,000,^  1915,  $20,- 
000; 

ANNUAL  GROUND  RENT:  21  years,  at  $4,424.  See  below; 
$4,042  in  1905,  but  see  below; 

TERMS  OF  LEASES  AND  OTHER  INFORMATION:  21  years, 
from  October  24,  1888;  Leased  for  13  years  6  months,  at  ground  rent  in 
1873  of  $900. 

Ground  rent  in  1885  was  $1,810; 

Ground  rent  in   1905  was  4,042; 

(Benjamin  Altman,  in  1905,  combined  the  above  two  properties  in 
a  single  lease  from  Columbia  College  for  21  years  at  $17,500,  at  end  of 
term  lessor  may  buy  buildings  or  renew  for  21  years.  At  end  of  third 
term  lessee  may  remove  building  or  lessor  pay  2/3  of  value  of  them.) 

(5).  LOCATION:  North  side  of  14th  Street,  next  east  of  corner 
Fifth  Avenue  (50  x  129)  Lot  5,  Block  842,  Section  3; 

OWNER  OF  LAND :  Heirs  of  Mary  S.  Van  Beuren  (daughter  of 
Eliza  M.  Fonerdon,  a  Spingler  heir ; 

OWNER  OF  BUILDING  (LESSEE  OF  LAND) :  Metropolitan 
Safe  Deposit  Company,  October,  1903; 

ASSESSED  VALUE  OF  LAND:    191 5,  $137,500; 

ASSESSED  VALUE  OF  BUILDING:     1915,  $30,000; 

ANNUAL  GROUND  RENT:    $6,000. 

TERMS  OF  LEASES  AND  OTHER  INFORMATION:  21  years, 
from  October,  1903,  Option  to  lessor  to  renew  lease  or  take  buildings 
at  an  appraised  value ; 

In  1846  the  ground  rent  was  $625  (Thomas  Oliver). 

In  1867  the  ground  rent  was  $3,000  (Lorenzo  Delmonico). 

In  1888  the  ground  rent  was  $5,500  (James  R.  Boyd). 

(6).  LOCATION:  Northeast  corner  of  Fifth  Avenue  and  14th 
Street;  100  ft.  on  14th  Street  and  half  block  along  5th  Avenue,  Lot  I, 
Block  842,  Section  3; 

OWNER  OF  LAND :  Heirs  of  Mary  S.  Van  Beuren  (daughter  of 
Eliza  M,  Fonerdon,  a  Spingler  heir). 

OWNER  OF  BUILDING  (LESSEE  OF  LAND):  Samuel  H. 
Blatchford  (et  al  trustees)  ; 

ASSESSED  VALUE  OF  LAND:    191 5,  $270,000; 

ASSESSED  VALUE  OF  BUILDING:    $1915,  $70,000. 

ANNUAL  GROUND  RENT:    $7,250. 

TERMS  OF  LEASES  AND  OTHER  INFORMATION:  Ground 
rent  in  1835  was  $390  (Samuel  H.  Tisdale) ;  1856,  was  $1,375  (Moses  H. 
Grinnell)  ;  1887,  was  $3,500  (Moses  H.  Grinnell). 

These  are  examples  only  of  the  Spingler  Estate  leases  which  in- 
cluded land  west  of  Union  Square,  along  the  north  side  of  14th  Street 
and  covering  several  of  the  streets  and  avenues  in  that  neighborhood. 

2.  There  is  a  tendency  toward  a  decrease  in  the  number  of  parcels 
leased  on  a  pure  ground  rent  basis  and  an  increase  in  leases  where  the 
land  owner  owns  the  building  or  builds  a  building  to  suit  a  lessee  and 

172 


leases  the  entire  premises  for  a  long  term  of  years.     This  tendency  is 
due  mainly  to  two  things: 

First.  As  ground  leases  expire  the  ownership  of  the  buildings  re- 
verts in  many  cases  to  the  land  owner,  who  then  finds  a  new  tenant 
who  leases  the  entire  premises.  This  is  more  especially  true  in  some 
of  the  older  residence  neighborhoods  such  as  lower  Greenwich  Village. 
Second.  In  the  newer  business  localities,  such  as  Fifth  Avenue,  be- 
low 59th  Street,  a  land  owner  and  a  lessee  will  contract  for  a  lease  for  a 
new  building  to  suit  the  special  requirements  of  the  lessee.  The  rental 
is  usually  a  precentage  based  on  an  appraised  value  of  land,  plus  the 
cost  of  the  building.  This  method  is  growing  in  favor  as  it  places  the 
lessee  practically  on  the  same  financial  basis  as  though  he  found  the 
cash,  purchased  the  land  and  built  the  building.  The  land  owner  is 
assured  of  his  income  on  the  land  valuation  and  is  also  permitted  to 
realize  on  the  future  increment  in  land  value  as  the  community  prospers 
and  grows.     The  following  is  typical  of  this  kind  of  lease : 

LOCATION :     Gimbel's  Building,  westerly  side  of  Sixth  Avenue, 
between  32nd  and  33rd  Streets — Lots  21-65,  inc. — Block  808,  Section  3; 
OWNER  OF  LAND :     Greeley  Square  Realty  Company  (John  D. 
Lockman,  Pres.). 

OWNER  OF  BUILDING  (LESSEE  OF  LAND) :    Gimbel  Bros. 
(Jacob  Gimbel,  Pres.),  April  23,  1909 — Liber  148,  Page  107,  Section  3; 
ASSESSED  VALUE  OF  LAND:     1915,  $4,100,000; 
ASSESSED  VALUE  OF  BUILDING:     1915,  $2,750,000; 
ANNUAL   GROUND   RENT:     191 1,   1912,   1913,  $605,000;   1914, 
$615,000;  1915,  $620,000;  1916-1920,  inc.,  $630,000;  remainder  of  term, 
$655,000. 

TERMS  OF  LEASES  AND  OTHER  INFORMATION:  Leases 
land  and  building.    Term,  21  years,  from  August  i,  1910; 

Renewals  for  one,  two,  three  or  four  successive  terms:  ist — not 
less  than  $655,000,  nor  more  than  $705,000. 

The  store  properties  of  Arnold  Constable  &  Company,  Bonwit, 
Teller  &  Company,  A.  A.  Vantine  &  Co.,  and  others,  may  be  mentioned 
as  illustrating  this  kind  of  lease. 

A  third  class  of  leases  of  entire  improved  properties  represents  prac- 
tically management  of  improved  properties  under  which  the  lessee 
guarantees  the  owner  of  the  building  a  certain  net  return  and  relieves 
the  owner  of  all  care.  The  lessee  makes  what  he  can  above  the  rental 
to  the  owner  and  presumably  his  profits  are  measured  by  his  skill  in  the 
detail  of  management.    This  is  a  growing  custom. 


173 


ii 


h 


I 


II 


! 


M 


I 


BRIEF  SUBMITTED 

ON  THE 

UNTAXING  OF  BUILDINGS. 


BRIEF    SUBMITTED    ON    BEHALF    OF    THE    SOCIETY    TO 

LOWER  RENTS  AND  REDUCE  TAXES  ON  HOMES. 

By  Benjamin  C.  Marsh,  Executive  Secretary. 


1.  MORAL  REASONS  FOR  UNTAXING  BUILDINGS. 

II.  ECONOMIC  REASONS  FOR  UNTAXING  BUILDINGS 

III.  FISCAL  REASONS  FOR  UNTAXING  BUILDINGS. 

IV.  ALLEGED  OBJECTIONS  TO  UNTAXING  BUILDINGS 
V.  RESULT  OF  UNTAXING  BUILDINGS  ELSEWHERE. 

I.    MORAL  REASONS  FOR  UNTAXIN(j   BUILDINGS. 

There  is  no  justification  for  taxing  labor  or  the  products  of  labor 
unless  the  revenue  to  be  derived  therefrom  is  needed  for  the  cost  of 
government  efficiency  and  properly  administered  because  adequate  rev- 
enue for  such  purpose  cannot  be  secured  from  any  other  source. 

There  are,  however,  only  two  sources  of  revenue  for  government- 
taxation  of  land  values  and  taxation  of  the  products  of  labor 

The  city  budget  of  New  York  City  is   (1914) $192,995,000 

I  he  tax  levied  upon  land  value  is 82,473,000 

The  tax  levy  upon  buildings  is Si^'^QOOO 

The  tax  levy  upon  land  and  buildings  is   .[   lasissiiooo 

The  ground  rent  of  New  York  City  calculated  at  only  6%  on' as- 
sessed land  values  is  $276,180,000. 

The  transfer  of  $51,359,000  of  taxes  now  secured  by  taxing  build- 
mgs  to  land  values  would  increase  the  levy  on  land  values  to  $133,- 
831,000.  This  would  leave  the  land  owners  (calculating  the  ground 
rent  as  above  at  6%  on  the  assessed  value  of  land),  $142,349,000,  or 
3.1%  on  the  assessed  value  of  land.  Recent  sales  of  real  estate  indi- 
cate that  the  selling  value  of  land  is  considerably  greater  than  the  as- 
sessed value  taking  the  city  as  a  whole. 

The  ground  rent  of  the  city,  as  a  whole,  is  probably  nearly  $300,000,- 
000,  so  that  even  with  the  transfer  of  taxes  from  buildings  to  land  net 
ground  rents  would  be  about  $170,000,000  a  year— or  putting  the  value 
of  land  at  $4,800,000,000,  the  net  ground  rent  would  be  about  3.6%  in 
addition  to  the  annual  increase  of  land  values  which  average  nearly 
$100,000,000  net  exclusive  of  assessments,  which  during  the  past  8  years 
have  averaged  only  about  $8,900,000.     Calculating  the  net  increase  in 

174 


land  values  at  $90,000,000  annually,  the  profits  of  land  ownership  in  the 
city  are  5.4%  net. 

There  is  obviously  no  justification  for  taxing  buildings  on  the  plea 
that  the  city  needs  this  source  of  revenue  since  the  owners  of  land  would 
secure  larger  net  revenues  with  buildings  untaxed  (including  increases 
in  land  values)  than  depositors  in  saving  banks  and  nearly  three  times 
as  large  as  the  interest  paid  by  the  U.  S.  postal  savings  banks. 

Were  even  more  of  the  ground  rent  of  the  city  taken,  however,  than 
the  $133,831,000  contemplated  by  transferring  to  land  values  the  pres- 
ent levy  on  buildings  so  that  land  owners  received  only  1%  or  2%  net 
revenue,  land  owners  would  have  no  just  cause  for  complaint.  Land 
values  and  ground  rent  are  peculiarly  the  product  of  population  and  of 
public  improvements  paid  for  by  the  population. 

These  values  may  be  shifted  from  one  part  of  the  city  to  another 
by  migration  of  population  or  of  business  and  said  fluctuation  should  be 
and  in  this  city  is  recognized  by  reducing  assessed  values  of  land  where 
it  has  shrunk  and  increasing  it  where  it  has  risen. 

It  should  be  noted,  too,  that  nearly  6/7  of  the  value  of  land  in  the 
city  has  some  building  improvement,  however  small,  and  the  owners 
are  securing  revenue  therefrom. 

In  1913,  the  assessed  value  of  the  191,742  absolutely  vacant  parcels 
(not  lots)  in  the  city  was  $644,635,185  out  of  a  total  assessed  land  value 
of  $4,590,892,350.  The  assessed  value  of  such  vacant  land  was,  in  Man- 
hattan, $182,5918,890;  in  The  Bronx,  $150,940,152.  The  greatest  acreage 
of  vacant  land  is  in  Queens,  Brooklyn  and  Richmond,  but  the  greater 
part  of  such  acreage  is  still  in  large  tracts  in  these  boroughs  and  at  least 
part  of  this  acreage  in  The  Bronx  and  a  large  part  of  it  in  Queens  and 
Richmond  would  yield  a  fair  return  if  utilized  for  intensive  gardening. 
Some  of  the  most  successful  market  gardening  in  the  world  is  now  be- 
ing carried  on  in  Queens  and  in  Richmond,  although  in  both  of  these 
boroughs  large  tracts  of  land  assessed  at  $1,000  to  $2,500  per  acre  are 
being  devoted  to  weeds.  The  owners  of  much  of  this  land  prefer  to  hold 
it  idle  and  try  to  secure  transit  lines  out  to  their  holdings  so  that  they 
can  sell  a  lot  at  about  the  assessed  value  of  an  acre  rather  than  to  put 
it  to  the  purpose  to  which  it  is  adapted  until  it  is  ripe  for  building.  This 
is  the  direct  result  of  our  present  system  of  taxation  under  which  land 
owners  pay  only  $42,472,000  in  taxes  for  the  cost  of  local  government  and 
the  city's  share  of  the  direct  state  tax,  while  the  workers  pay  most  of  the 
balance  of  this  budget,  $192,995,000  (1914),  i.  e.,  $110,520,000. 

The  present  division  of  the  profits  of  land  ownership  between  the 
few  thousand  people  who  own  most  of  the  value  of  land  here  and  the 
55^  million  population  whose  presence  is  the  chief  factor  in  creating  and 
maintaining  land  values  and  ground  rent  is  immoral  and  cannot  be  jus- 
tified. 

The  gross  profits  of  land  ownership,  including  ground  rent  and  the 
increase  in  land  values,  are  this  year  about  $400,000,000.  Out  of  this 
sum  land  owners  pay  in  taxes  $82,472,000  and  in  assessments  on  land 
about  $9,000,000,  a  total  of  $91,472,000,  making  the  net  profits  of  land 
ownership  approximately  $309,000,000.  The  principle  involved  can  be 
made  clearer  if  it  be  imagined  that  one  person  owned  all  of  the  land 
of  the  city  and  secured  this  profit  of  $309,000,000  after  paying  $91,000,000 
for  the  cost  of  government  here.  Probably  not  a  dozen  people  in  the 
city  outside. of  the  family  and  immediate  friends  of  such  "Owner  of  New 
York"  could  be  found  to  justify  this  division  and  the  consequence.     It 

175 


would  be  a  matter  of  relatively  small  importance  whether  this  man  had 
inherited  part  cf  the  land  from  ancestors  who  stole  it  from  the  Indians 
or  bought  it  from  them  for  a  trifle  or  whether  he  had  paid  25%,  50%,  75% 
or  90%  of  the  present  price  of  the  land.  His  utter  inability  to  earn  such 
an  unfair  proportion  of  the  profits  of  land  ownership  would  be  appreci- 
ated by  all  and  tliere  would  be  universal  demand  for  a  reversal  of  this 
division  between  the  people  and  the  "Owner  of  New  York/*  The  plea 
of  "confiscation"  would  be  forgotten.  The  question  would  be  "What 
have  you  done  to  earn  any  of  the  principal  or  the  interest,  the  land 
values  or  the  ground  rent?" 

There  is  little  difference  in  principle  so  there  may  be  a  fictitious 
difference  in  "expediency," — whether  one  person  or  ten  thousand  peo- 
ple "own"  the  land  of  the  city. 

THE  EXISTING  LAND  MONOPOLY  IN  NEW  YORK  CITY. 

It  is  impossible  to  give  the  exact  figures  as  to  the  land  monopoly  in 
the  city  because  the  real  estate  interests  have  succeeded  in  defeating 
legislation  requiring  the  name  of  the  true  owner  to  be  recorded — a 
practice  obtaining  in  Germany — and  because  they  have  similarly  de- 
feated bills  requiring  the  "true  price  paid"  to  be  recorded  in  deeds.  The 
following  figures  are  based  upon  the  assessed  value  of  land  and  the 
holdings  so  far  as  they  can  be  traced  without  such  full  investigation  as 
would  seem  necessary  only  to  those  who  uphold  the  present  system  of 
taxation. 

Five  thousand  people  own  over  half  of  the  value  of  land. 
8  families,  estates  and  corporations  own  about  1/23  of  the  value 
of  land. 

The  Astor  family  owns  about  1/60  of  the  value  of  the  land. 
Several  corporations  own  500  lots  in  Manhattan  and  from  100  to 
1,000  acres  in  The  Bronx,  Brooklyn,  Queens  and  Richmond. 

Under  the  present  uniform  tax  rate,  a  reduction  in  the  tax  rate  to 
reduce  expenditures  would  benefit  chiefly  land  owners,  and  not  the 
people  of  the  city  who  create  and  maintain  the  land  values  and  ground 
rents  of  the  city. 

In  1913,  the  assessed  valuation  of  the  different  classes  of  taxable 
property  in  the  city  was,  as  follows: 

Land    $4,590,892,350 

Buildings    2,796,344,754 

"Real   Estate  of  Corporations"   180,549,176 

"Special  Franchises"  438,861,581 

Personal  Property   325,421,340 

With  the  tax  rate  to  be  reduced  by  5  mills  on  the  dollar,  the  sav- 
ing would  be  as  follows: 

On  Land    $22,945,461.75 

On  Buildings    I3»98i,72377 

On  "Real  Estate  of  Corporations" 902,745.88 

On  "Special  Franchises"   2, 194,307 .<^ 

On  Personal   Property    1,627,106.70 

The  total  savings  to  land  owners  would  be  $22,954,441.75,  and  to 
all  other  classes  of  property  only  $18,705,884.25.  Land  owners  as  such 
would  save  over  $4,000,000  more  than  all  other  property  owners  and 
land  owners  would  secure  the  benefit  of  most  of  the  other  reduction  as 
well  as  in  that  on  land  although  the  tenants  (9/10  of  the  city's  popula- 

176 


tion)  would  get  practically  no  benefit  from  any  of  the  other  reductions. 

The  reduced  tax  rate  on  land  values  would  also  mean  that  the  price 

of  land  would  increase  enormously,  probably  at  least  $500,000,000,  and 

this  would  be  a  net  unearned  bonus  to  land  owners  and  land  speculators. 

n.     ECONOMIC   REASONS   FOR  UNTAXING   BUILDINGS. 
I.   Untaxing  Buildings  Will  Lower  Rents  and  Reduce  Taxes  on  Homes. 

No  economist  of  repute  denies  this  and  a  few,  if  any,  land  specu- 
lators, although  they  may  diflfer  as  to  the  extent  of  rent  reductions. 

The  following  questionnaire  was  sent  to  this  list  of  economists  re- 
garding the  reduction  of  the  tax  rate  on  buildings  in  New  York  City  to 
y2  that  on  land,  by  five  consecutive  annual  reductions : 

QUESTIONS. 

1.  Would  the  selling  value  of  land  be  appreciably  reduced? 

2.  Would  the  increase  in  the  selling  value  of  land  be  appreciably 
less? 

3.  Would  the  result  of  the  higher  tax  on  land  and  lower  tax  rate 
on  buildings  be  a  greater  increase  in  the  number  of  buildings  than  with 
the  uniform  rate  of  taxation? 

4.  Would  rentals  in  tenements  and  other  buildings  be  reduced 
more  than  the  total  taxes  on  improvements? 

5.  Would  the  possibility  of  a  slight  decrease  in  land  values  due  to 
the  higher  tax  rate  on  land  cause  the  calling  of  loans  on  improved  prop- 
erty? 

6.  Can  the  landlord  shift  the  increase  in  taxes  on  a  property  where 
the  land  is  worth  much  more  than  the  buildings  to  the  tenant? 

7.  Is  it  just  to  tax  land  increments  (i.  e.,  increases  in  land  values 
after  a  given  date)  at  a  higher  rate  than  that  imposed  on  all  land  in  the 
city? 

8.  Is  it  "confiscatory"  to  increase  slightly  the  tax  rate  on  land 
values  ? 

9.  Is  it  "discrimination"  to  tax  land  values  at  a  higher  rate  than 
buildings? 

10.  Is  it  good  fiscal  policy  to  tax  land  values  more  heavily  than 
buildings? 

11.  Would  the  lower  tax  rate  on  buildings  encourage  home  owner- 
ship? 

12.  Would  the  increased  values  of  buildings  under  the  stimulus 
of  the  lower  tax  rate  increase  the  taxable  base  of  the  city? 

ECONOMISTS. 

Prof.  Irving  Fisher,  Yale  University. 
Prof.  T.  N.  Carver,  Harvard  University. 
Prof.  Walter  H.  Clark,  College  of  the  City  of  New  York. 
Prof.  E.  A.  Ross,  University  of  Wisconsin.  ; 

Prof.  John  R.  Commons,  University  of  Wisconsin. 
Prof.  C.  Linn  Seiler,  University  of  Pennsylvania. 
Prof.  Franklin  L.  McVey,  University  of  North  Dakota. 
Prof,  Royal  Meeker,  Princeton  University. 
Only  one  of  the  eight.  Prof.  Ross,  thinks  that  the  selling  value  of 
land  would  be  appreciably  reduced.     Prof.  Carver  thinks  it  is  doubt- 

177 


ful.  Professors  Clark,  Carver,  Meeker,  and  Ross  think  the  increase  in 
the  selling  price  of  land  would  be  appreciably  reduced.  Prof.  Fisher 
thinks  that  it  would  be  slightly  reduced,  and  Professors  Seiler  and 
McVey  that  it  would  not  be  reduced  at  all. 

All  are  agreed  that  more  buildings  would  be  constructed  with  the 
halved  tax  rate  on  buildings  than  with  the  uniform  tax  rate. 

The  six  replying  to  the  question  say  rents  would  be  reduced  to  a 
greater  extent  than  the  reduction  in  taxes. 

Only  one  thinks  that  loans  could  be  called  on  improved  properties 
to  amount  to  anything,  Prof.  Seiler,  who  thinks  this  might  possibly  be 
done  for  a  short  time. 

Only  Prof.  Seiler  thinks  that  where  the  total  tax  on  an  improved 
property  is  increased  because  the  land  is  worth  so  much  more  than  the 
building,  the  owner  can  shift  part  of  the  increased  tax  to  the  tenant 
generally ;  the  rest  deny  this. 

All  are  agreed  that  it  is  just  to  tax  land  increments  at  a  higher  rate 
than  that  imposed  on  all  land  in  the  city. 

As  to  whether  it  is  "confiscatory"  to  tax  land  values  at  a  slightly 
higher  rate.  Prof.  Ross  says,  "No";  Prof.  Seiler,  "Difficult  to  answer"; 
Prof.  Fisher,  "All  taxation  is  confiscatory" ;  Prof.  Carver,  "Somewhat 
but  not  enough  to  count";  Prof.  Clark,  "Not  unless  every  tax  is  confis-, 
catory";  Prof.  Meeker,  "The  definition  of  'confiscatory'  must  be  left 
to  the  lawyers." 

To  the  question  whether  it  is  "discrimination"  to  tax  land  values 
at  a  higher  rate  than  buildings.  Prof.  Fisher  says,  "No  more  than  the 
difference  in  any  other  taxes,  e.  g.,  whiskey  and  matches."  Prof.  Car- 
ver, "Yes."  Prof.  Clark,  "It  is  valid  discrimination."  Prof.  Ross,  "It  i^ 
proper  discrimination  based  on  difference  in  origin  of  such  values."  Pro- 
fessors Seiler,  McVey  and  Meeker,  "No." 

Every  one  of  them  agree  that  it  is  good  fiscal  policy  to  tax  land 
at  a  higher  rate  than  buildings. 

All  but  Prof  Carver  think  it  would  encourage  ownership  of  homes. 

Professors  Clark,  Fisher,  McVey  and  Meeker  think  that  the  half 
tax  on  buildings  would  increase  the  taxable  base  of  the  city  through 
stimulating  the  construction  of  new  buildings ;  Prof.  Carver  thinks  this 
doubtful.  Prof.  Ross  omitted  to  reply.  Prof.  Seiler  says  it  would  not 
if  the  city  is  normally  increasing  in  wealth. 

Prof.  Commons  sent  the  following  statement:  "I  have  long  been 
strongly  convinced  that  a  gradual  reduction  of  the  tax  rate  on  buildings 
leading  finally  to  exemption  of  all  improvements  would  be  one  of  the 
most  important  gains  that  could  be  accomplished  in  our  system  of  tax- 
ation. This  is  peculiarly  true  as  a  city  grows  in  size  and,  of  course,  my 
judgment  would  apply  to  New  York  more  than  any  other  place  in  the 
country." 

Prof.  Henry  R.  Seager,  in  his  "Principles  of  Economics"  (p.  532), 
says :  "The  increase  in  the  rents  and  price  which  city  lots  command 
as  compared  with  open  fields  is  due  chiefly  to  the  growth  of  the  city  and 
to  improvements  for  which  the  city  has  paid.  It,  therefore,  seems  but 
just  that  a  large  part  of  the  income  received  from  city  lots  should  go  to 
the  city  treasury. 

"On  these  grounds,  and  others  of  a  more  technical  character,  a 
gradual  increase  in  the  proportion  of  municipal  taxation  that  falls  on 
land  as  distinguished  from  improvements  and  different  forms  of  per- 
sonal property  is  much  to  be  desired." 

178 


Prof.  E.  R.  A.  Seligman  stated  to  the  New  York  Commission  on 
Congestion  of  Population  which  recommended  the  reducing  the  tax  rate 
on  buildings  in  New  York  City  to  J/^  that  on  land : 

"A  tax  upon  anything  produced  tends  to  check  the  production  of 
that  thing.  The  remission  of  the  taxes  tends  to  encourage  the  produc- 
tion. The  house  is  produced  for  what  you  can  get  out  of  it  and  if  you 
make  it  worth  while  for  people  to  put  money  into  houses,  of  course,  they 

will  do  so." 

The  late  Mayor  Gaynor  put  the  immutable  economic  law  as  follows : 

"If  buildings  were  no  longer  taxed  that  would  stimulate  people  to 
build  buildings ;  but  when  you  clap  a  tax  on  buildings  then  the  people 
are  not  in  a  hurry  to  build  them.  They  have  to  calculate  it  all  out  and 
see  where  they  are  coming  out,  where  they  can  get  the  rents  to  pay 
interest  and  taxes.  But  if  buildings  were  freed  from  taxes,  there  would 
be  more  buildings  put  up;  and  the  more  buildings  put  up,  the  lower 
rents  would  be.  I  am  back  to  my  starting  point  that  rents  of  buildings 
depend  upon  supply  and  demand;  therefore  any  system  of  taxation 
which  stimulates  the  building  of  buildings  multiplies  the  number  of 
buildings,  automatically  lowers  rents." 

An  application  of  the  results  of  untaxing  buildings  and  trans- 
ferring these  taxes  to  land  will  illustrate  this  fact. 

The  average  uniform  tax  rate  in  all  counties  of  the  city  is  this  year 
$1.80  per  $100  of  assessed  value.  Were  buildings  untaxed,  the  tax  rate 
on  land  values  would  be  $2.91.  A  tenement  house  assessed  for  $40,000, 
the  land  for  $10,000  and  the  building  for  $30,000,  pays  this  year  $720— 
were  buildings  untaxed,  total  taxes  on  the  land  would  be  $291,  i.  e.,  the 
owner  would  save  $429.  Obviously  he  could  give  each  of  ten  tenant 
families  a  reduction  of  $40  a  year  in  rent  and  still  be  better  off  than  he  is 
to-day.  The  taxes  on  tenement  house  property  assessed  for  $20,000, 
the  land  for  $15,000  and  the  building  for  $5,000  (ratio  not  uncommon  in 
some  of  the  worst  tenement  districts)  are  this  year  $360.  Were  build- 
ings untaxed,  the  total  taxes  on  the  land  would  be  $436.50,  an  increase 

of  $76.50. 

Would  the  landlord  be  able  to  increase  his  rents  in  this  tenement 
by  $76.50?  Would  the  owner  of  a  tenement  house  property  of  which  the 
land  is  assessed  for  $10,000,  the  building  for  $2,000,  be  able  to  charge  his 
tenants  the  increased  taxes  with  buildings  untaxed,  amounting  to  $75? 
Obviously  not,  for  the  following  reasons :  (a)  There  are  in  Manhattan, 
1913,  8,211  absolutely  vacant  parcels,  many  of  them  comprising  several 
lots— a  total  of  approximately  10,000  lots.  These  vacant  parcels  are 
scattered  throughout  the  entire  borough  in  about  2/3  of  the  blocks. 
There  are  also  approximately  20,000  lots  with  improvements  of  3-stories 
or  less,  most  of  them  one  or  two  stories  "taxpayers,"  similarly  scattered 
throughout  the  borough.  All  these  vacant  and  under-improved  lots 
in  Manhattan  are  a  source  of  potential  competition  to  the  owners  of  ex- 
isting tenements  which  would  be  sufficient  to  prevent  them  from  at- 
tempting to  raise  rents  even  should  the  taxes  on  old  worn-out  tenement 
properties  be  doubled.  The  taxes  on  vacant  land  would  be  increased  by 
about  3/5  (from  1.80%  to  2.91%  on  the  assessed  value),  while  on  a 
good  many  properties  with  worn-out  improvements  they  would  be  in- 
creased by  1/5  to  1/2. 

Naturally  the  increased  tax  rate  on  all  land  will  compel  the  own- 
ers to  sell  their  land  at  a  lower  price  than  they  would  with  the  present 
tax  rate. 


t 
I 


IH 


! 


]79 


A  vacant  lot  which  would  sell  for  $10,000  at  the  present  tax  rate, 
would  probably  be  sold  for  at  most  $9,000  if  not  for  $8,500  with  a  tax 
rate  of  $2.91.  A  man  who  wants  to  construct  a  $30,000  tenement  on 
such  a  lot  would  save  at  least  $1,000  on  the  original  cost,  that  is,  at  5% 
an  annual  carrying  charge  of  $50.  His  total  taxes,  as  shown  above, 
would  be  about  $430  less  than  at  the  present  uniform  tax  rate,  i.  e.,  he 
would  make  a  total  annual  saving  of  nearly  $500  on  this  property  through 
untaxing  buildings. 

The  purchaser  of  the  vacant  lot  would  have  an  advantage  over  the 
owner  of  vacant  lots,  for  the  owners,  in  the  words  of  one  of  the  most 
successful  land  speculators,  would  "like  to  unload  their  vacant  lots"  as 
soon  as  heavier  taxation  of  land  values  begins. 

As  is  well  known,  not  1/3  of  the  land  in  the  Borough  of  Brooke 
lyn  is  improved  with  buildings,  not  1/6  of  the  Borough  of  The  Bronx 
where  half  of  the  population  live  on  about  1/20  of  the  area,  not  1/20  of 
the  area  of  Queens,  while  Richmond  is  still  a  borough  of  "little  farms" 
and  big  farms.  At  least  3/5  of  the  area  of  Greater  New  York  available 
for  building  is  still  available  for  some  building  improvements  or  for 
more  intensive  building  improvements  than  it  has  at  present  without 
any  danger  of  over-intensive  use  of  land  or  congestion  of  population 
per  acre  or  block. 

(b).  The  assessed  value  of  land  in  Manhattan  (1913),  is  $3,155,389,- 
410,  approximately  3/4  of  the  total  assessed  value  of  the  city  ($4,590,- 
892,350). 

The  provision  of  more  rapid  transit  lines  to  the  outlying  boroughs 
and  control  over  the  location  of  factories,  with  a  gradual  removal  of 
factories  from  Manhattan  to  the  other  boroughs,  will  effectually  prevent 
tenement  owners  in  Manhattan  from  either  charging  higher  rents,  if 
their  taxes  are  increased,  or  from  keeping  any  advantage  of  lower  taxes 
on  adequate  improvements  when  buildings  are  untaxed.  The  tremendous 
competition  of  vacant  lots  in  all  the  other  boroughs  will  be  sufficient 
there  to  give  tenants  this  advantage,  even  with  the  rapid  increase  in 
population  and  factories.  The  opposition  of  landlords  in  all  boroughs 
to  the  change  is  proof  that  they  appreciate  this  fact. 

2.     Untaxing  Buildings  Will  Lower  Interest  Rates. 

Interest  rates  are  determined  primarily  by  the  law  of  supply  and 
demand.  The  interest  rate  on  even  a  risky  investment  will  be  less  if 
there  is  a  greater  quantity  of  capital  seeking  investment  than  if  through 
extensive  government  loans,  industrial  developments,  wars,  etc.,  there 
is  a  stringency  in  the  money  market. 

If  buildings  were  untaxed  and  the  levy  upon  buildings  transferred 
to  land  values,  tenants  and  small  home  owners,  and  business  men  as 
such  would  be  saved  approximately  $50,000,000.  Most  of  this  saving 
would  accrue  to  tenants  and  small  home  owners.  Part  of  this  saving 
would  be  seeking  investment,  probably  at  least  $10,000,000  to  $12,000,000 
a  year.  The  small  saver  accepts  a  lower  rate  of  interest  than  a  person 
with  large  wealth.  This  is  proven  by  the  fact  that  savings  bank  deposi- 
tors accept  3J^%  to  4%,  while  the  U.  S.  Postal  Savings  Banks  have  been 
able  to  secure  large  and  rapidly  increasing  deposits  at  2%. 

In  February,  191 1,  there  were  48  postal  savings  bank  offices  in 
operation  in  the  country  and  the  balance  on  deposit  was  $110,884.38.  In 
June,  1913,  the  balance  on  deposits  in  12,158  offices  was  $31,512,333.46. 

180 


Even  with  the  small  savings  through  reduced  rents  and  lower 
taxes  of  $12,000,000  a  year,  this  would  amount  to  $120,000,000  in  a  de- 
cade. 

Moreover,  with  buildings  untaxed,  the  city  will  be  in  a  position  (as 
shown  more  fully  in  the  next  section,  III)  to  pay  more  of  its  expenses 
currently  and  to  abolish  other  sources  of  revenue,  to  the  advantage  of 
everyone  in  the  community  except  the  land  speculator. 

Thus,  with  buildings  untaxed,  a  tax  rate  on  assessed  land  values 
(1914),  of  only  5  mills  on  the  dollar  would  yield  $23,015,000  or  over  1/3 
of  the  average  annual  issue  of  corporate  stock  during  the  past  8  years 

A  tax  rate  of  a  little  less  than  3  mills  on  the  dollar  on  land  values 
would  enable  the  city  to  give  free  water  although  it  collects  this  year 
about  $14,000,000  for  water.  Free  water  would  save  the  average 
family  in  the  city  $5  to  $10  annually.  Within  10  or  15  years  with  build- 
ings untaxed  and  land  values  heavily  taxed,  say,  at  the  rate  of  3.5%, 
3.75%,  hundreds  of  thousands  of  families  in  the  city  of  the  class  now 
existing  below  a  safe  and  sane  standard  of  living  would  be  able  to  save 
$20  to  $25  for  investment ;  in  the  aggregate,  saving  for  such  purposes  in 
addition  to  present  savings  would,  doubtless,  be  $15,000,000  to  $20,000,- 
000  a  year. 

It  should  be  noted,  too,  that  the  current  payment  of  current  expenses 
now  met  by  issuing  (chiefly)  50-year  corporate  stock  will  release  $20,- 
000,000  or  so  a  year  for  investment.  The  conspicuous  and  blatant 
methods  in  which  our  multi-millionaire  land  speculators  and  their  fam- 
ilies consume  the  ground  rents  we  pay  them  does  not  add  to  capital,  it 
reduces  and  destroys  it. 

A  total  increase  of  even  $30,000,000  a  year  seeking  investment  would 
materially  reduce  interest  rates,  to  the  manifest  advantage  of  legitimate 
business  as  distinguished  from  speculative  purposes.  Untaxing  build- 
ings will  permit  the  most  effective  organization  of  credit — and  for  the 
benefit  of  workers  instead  of  land  speculators. 

3.     Untaxing  Buildings  Will  Reduce  Unemployment. 

Nearly  half  of  the  men  employed  in  the  building  trades  in  the  city 
are,  and  have  been,  unemployed  for  many  months,  partly  due  to  the  fact 
that  the  per  capita  value  of  buildings  being  constructed  is  only  about 
Yi  as  large  as  in  1910. 

The  replacement  of  the  tens  of  thousands  of  old,  unsanitary  fire-trap 
buildings  in  this  city  with  modern,  safe  buildings,  which  will  be  stimu- 
lated by  untaxing  buildings,  will  furnish  employment  not  only  to  those 
in  the  building  trades  but,  as  well,  to  those  who  manufacture  commodi- 
ties they  use.  Prof.  A.  C.  Pigou  states,  in  "Wealth  and  Welfare" :  "As 
the  rate  of  interest  falls,  instrumental  goods  come  to  be  built  more  solid- 
ly and  to  be  repaired  and  renewed  more  readily  when  need  arises."  (p. 

81,  footnote.) 

Thus  production  and  consumption  will  be  encouraged  and  stimu- 
lated when  taxes  on  objects  produced  are  reduced  as  well  as  when  in- 
terest rates  are  reduced.  The  operation  of  both  forces  is  identical  when 
land  values  are  taxed  heavily. 

The  heavy  and  unnecessary  burden  of  taxes  on  modern  healthful 
tenements  is  appreciated  when  it  is  realized  that  although  the  assessed 
value  (1914)  of  all  buildings  of  every  description  in  the  city  is  only 
$2,855,932,518,  the  value  of  the  tenements  constructed  since  the  present 

181 


(I 


'  1 

!  II  ' 

II 

Bl 

Tenement  House  Law  went  into  effect,  July  i,  1901,  is  $902,947,841.  The 
assessed  value  of  these  tenements  is  this  year  at  least  $875,000,000 — 
that  is,  they  are  paying  about  1/3  of  the  total  taxes  on  buildings  in  the 
city.  Although  these  new  law  tenements  house  only  about  1/5  of  the 
tenants  of  the  city,  they  pay  approximately  half  of  the  taxes  on  tene- 
ments. 

III.    FISCAL  REASONS  FOR  UNTAXING  BUILDINGS. 

New  York's  system  of  raising  revenue  is  archaic  and  unjust.  The 
chief  object  of  most  administrations  has  been  to  keep  down  the  tax  rate, 
by  saddling  upon  future  generations  the  cost  of  public  improvements 
and  current  expenses  which  should  have  been  paid  currently  by  current 
revenues.  These  administrations  have  realized  that  a  higher  general 
tax  rate  would  prejudice  their  party  with  the  voters  who  if  tenants 
would  see  their  rent  increase  and  if  small  home  owners  their  total 
taxes  largely  increase  while  buildings  are  taxed  at  the  same  rate  as 
land  values. 

The  loaning  interests  of  the  city  which,  with  the  land  speculators, 
have  controlled  the  city  government  without  intermission  as  they  do  to- 
day, have  naturally  favored  this  policy  of  a  low  tax  rate  and  heavy 
loans.  Through  their  manipulation  they  have  kept  the  city  going  deeper 
into  debt  so  that  the  debt  limit  is  now  practically  reached. 

The  tax  rate  on  assessed  land  values  has  varied  from  $1.49  per  $100 
in  1907  to  $1.84  in  1912.  In  1907,  land  was  assessed  at  about  90%  of  its 
market  value,  so  that  the  tax  rate  on  full  value  was  only  about  $1.33. 

The  ground  rent  of  the  city  from  1906  to  1913,  calculated  at  6% 
on  full  land  values,  amounted  to  $2,051,717,352.  The  increase  in  land 
values  was  about  $1,200,000,000.  Total  gross  profits  of  land  ownership 
during  the  past  8  years — $3,251,717,353.  The  total  taxes  on  land  values 
during  the  past  eight  years  were  only  $71,819,659.  The  total  assessment 
on  land  values  during  the  past  eight  years  was  only  $548,181,865. 

The  total  charges  on  land  during  the  past  8  years  were  only  $620,- 
001,524. 

Net  profits  of  land  ownership  here  during  the  past  8  years — $2,631,- 
715,829. 

The  total  current  city  budget  in  these  8  years  was  $1,238,383,455. 
Since  the  cost  of  government  not  met  by  taxing  land  values  has  been 
paid  by  taxes  upon  labor  and  the  products  of  labor,  this  total  charge 
during  8  years  past  has  been  approximately  $675,000,000.  (Since,  about 
$15,000,000  has  been  received  from  the  school  moneys  of  the  state.) 
During  these  8  years,  the  net  funded  debt  of  the  city  has  been  increased 
by  over  $408,526,642 — from  $430,556,400  to  $839,083,042.  Corporate 
stock  was  issued  during  these  8  years  in  the  sum  of  $519,177,711 ;  while 
the  interest  paid  on  the  city  debt  amounted  to  $234,118,908,  and  only 
$63,992,725  of  the  city  debt  was  paid  off. 

TO  SUMMARIZE:  The  profits  of  land  ownership  in  New  York 
City  during  the  past  8  years  have  been  approximately  $3,251,000,000. 
The  current  and  corporate  stock  budgets  have  amounted  to  only  $1,- 
757,561,166,  or  about  1/2  of  the  profits  of  land  ownership.  Instead  of 
paying  this  cost  of  government  currently  out  of  ground  rents,  land 
values  have  paid  in  taxes  and  assessments  only  $620,000,000,  the  workers 
of  the  city  have  been  mulcted  out  of  about  $675,000,000  and  the  city  has 
borrowed  about  $519,000,000  upon  which  it  will  have  to  pay  approxi- 
mately $1,000,000,000  in  interest  during  the  next  50  years.  This  has  been 

182 


an  orgy  of  frenzied  municipal  finance,  with  the  tenants  and  small  home 
owners  of  the  city  mulcted  wittingly  by  the  two  past  administrations  for 
the  benefit  of  land  speculators  and  the  financial  interests. 

Comptroller  Prendergast  has  reported  to  the  Mayor  that  the  debt- 
incurring  power  of  the  city  on  January  2,  1914,  was  $5i»373'749-62.  This 
is  practically  all  mortgaged  for  schools  and  other  current  necessities. 

The  city  should  spend  at  once  $100,000,000  to  $150,000,000  on  the 
port  and  dock  development.  Instead  of  being  in  a  position  to  do  so, 
it  is  acquiring  driblets  of  land  in  the  most  expensive  and  unsatisfactory 
way  for  the  city,  though  it  is  highly  satisfactory  to  land  speculators. 

The  efforts  of  the  financial  interests  of  the  city  to  compel  the  city 
to  resort  to  private  capital  and  to  insure  high  dividends  to  private  capi- 
tal has  been  successful. 

The  stupidity  of  land  speculators  which  is  exceeded  only  by  their 
cupidity  has  got  them  into  hot  water.  Had  they  eight  years  ago  permitted 
even,  not  to  say  urged,  that  the  land  values  be  attached  at  $2.25  on  full 
value  while  buildings  were  taxed  at  only  the  actual  rates  during  these 
past  eight  years,  the  city  would  have  secured  about  $221,000,000  more 
revenue,  or  2/5  of  the  indebtedness  occurred  during  this  period. 

The  system  of  taxing  labor  and  the  products  of  labor  has  increased 
rents  and  sickness  and  delinquency  and  the  cost  to  the  city  of  caring 
for  the  victims  oi  disease  and  delinquency. 

Directly  and  indirectly,  the  city  is  spending  about  $10,000,000  a 
year,  not  to  prevent  disease  and  delinquency,  but  to  cure  the  victims — 
a  stupid  and  unnecessary  expenditure  which  increases  the  tax  rate. 

The  city  has  paid  on  the  average  about  $18,000,000  a  year  for  land 
since  1906.  Mr.  Wm.  H.  Chesebrough,  who  was  chairman  of  the  Real 
Estate  Owners'  Association,  said  last  fall: 

"One  of  the  most  efficient  instruments  for  mulcting  the  taxpayers 
has  been  the  system  of  acquiring  land  by  condemnation  under  the 
methods  which  have  existed  for  many  decades  past.  As  a  general  rule, 
it  is  not,  I  think,  too  much  to  say  that  land  so  acquired  has  cost  the 
city  at  least  twice  and,  in  many  cases,  three  or  four  times  what  it  was 
actually  worth." 

City  Chamberlain  Bruere  stated  last  fall :  "Real  estate  speculators 
have  tapped  the  city  treasury  to  their  heart's  content." 

The  method  of  condemnation,  however,  is  not  responsible  for  the 
high  prices  paid  for  land  by  the  city  as  much  as  the  present  system 
of  taxation. 

The  assessed  value  of  land  acquired  last  year  for  the  Court  House 
was  $4,077,500.  The  Elkus  Commission,  which  condemned  this  prop- 
erty, did  their  work  very  efficiently,  relatively.  But  they  awarded  a 
much  larger  sum  than  the  assessed  value  of  the  land. 

It  is  admitted  by  land  speculators  themselves  that  if  the  tax  rate 
on  land  were,  say  $3,  instead  of  $1.80,  the  owners  of  the  land  would  sell 
their  land  decidedly  cheaper.  It  is  most  conservative  to  estimate  that 
the  city  would  save  annually  on  real  estate  acquisition  (since  the  build- 
ings represent  ordinarily  only  about  1/3  of  the  total  award)  at  least 
$2,000,000  to  $2,500,000  if  buildings  were  untaxed,  even  if  it  continues  the 
present  policy  of  issuing  long  term  corporate  stock  to  pay  for  real  estate, 
and  that  it  would  save  about  $3,500,000  a  year  as  soon  as  it  begins  to 
pay  a  just  proportion  of  its  expenses  currently  and  stops  paying  an 
average  of  about  $40  a  year  per  family  for  interest  on  the  city  debt. 

183 


, 


.    * 


It  must  be  apparent  to  the  densest  standpatter  that  it  is  very  ex- 
pensive to  business  men  of  all  sorts,  manufacturers,  merchants,  small 
storekeepers  and  all,  to  have  to  pay  their  share  of  the  interest  on  the  citv 
debt  incubus,  which  amounted  last  year  to  $45,000,000,  nearly  y^  of 
the  total  city  budget. 

New  York  City  is  the  largest  employer  of  labor  in  the  city.  It 
has  about  90,000  persons  permanently  on  the  city  payroll,  and  15,000 
per  diem  or  temporary  employees  (besides  numerous  Mayoralty  sec- 
retaries, research  experts  and  accessory  specialists). 

Their  salaries  and  wages  amount  to  about  $98,000,000  a  year  for 
those  in  active  service,  while  the  city  has  not  yet  begun  to  pension  all 
its  employees.  If  it  does  pension  them  on  a  35%  basis,  the  wisdom  and 
justice  of  which  is  not  properly  to  be  debated*  here,  this  would  mean  a 
very  large  additional  expense  within  a  few  years.  It  is  not  claimed  by 
the  Board  of  Estimate  and  Apportionment  that  "readjustment  of  sal- 
aries" will  reduce  total  salary  and  wages  budget.  It  will  doubtless,  like 
most  "efficiency  and  economy"  measures,  increase  the  total.  About 
$25,000,000  of  the  city's  payroll  goes  for  rent.  Nearly  all  the  city's  em- 
ployees (except  those  with  salaries  of  $7,500  or  over)  want  their  salaries 
or  wages  increased,  and  the  most  common  reason  is  high  rents  and  high 
taxes  on  homes.  Untaxing  buildings  would  (as  demonstrated  in  Section 
II)  reduce  rents  by  1/5  to  1/6  and  taxes  on  small  homes  by  i/2  to  3/5. 
It  would  be  equivalent  to  raising  the  wages  and  salaries  of  city  em- 
ployees by  $4,500,000  to  $5,000,000  or  more  and  IT  WOULD  BE  MORE 
EQUITABLE  AND  JUST  TO  THE  TENANTS  AND  SMALL  HOME 
OWNERS  OF  THE  CITY  NOT  IN  MUNICIPAL  EMPLOY  TO 
DO  IT  IN  THIS  WAY;  but  within  a  short  time  (probably  just  before 
the  next  municipal  election)  wages  and  salaries  of  city  employees  will 
be  raised  if  they  do  not  secure  relief  from  high  rents  and  high  taxes  on 
small  homes. 

Our  present  system  of  taxation  is  stupid  from  a  fiscal  point  of  view 
because:  (a)  It  compels  the  city  to  pay  enormously  high  prices  for 
land;  (b)  it  keeps  manufacturers  away  from  the  city  and  so  reduces 
the  taxable  base  of  the  city;  (c)  it  compels  the  city  to  pay  high  nominal 
NOT  real  wages  to  its  employees,  for  the  benefit  of  land  speculators,  to 
the  detriment  of  tenants  and  small  home  owners,  and  with  no  advantage 
to  the  employees  themselves;  (d)  it  compels  the  city  to  borrow  money 
to  pay  for  improvements  by  long  term  corporate  stock  issues  which 
should  be  paid  for  out  of  current  revenues  because  the  working  people 
cannot  and  will  not  stand  any  more  taxes,  direct  or  indirect,  and  no  admin- 
istration will  dare  to  impose  such  unjustifiable  and  iniquitous  taxes ;  (e) 
it  causes  sickness  and  delinquency  as  well  as  unemployment  and  in- 
volves a  huge  expense  to  the  city  to  deal  with  these  results  and  condi- 
tions. The  only  way  to  change  these  evils  is  to  untax  buildings  and 
other  products  of  labor  and  secure  more  of  the  ground  rent  to  the  cost 
of  government. 

IV.    ALLEGED  OBJECTIONS  TO  UNTAXING  BUILDINGS. 

I.  "It  is  'confiscation'  to  take  away  any  of  the  capital  invested  in 
land  'without  due  process  of  law.'  While  this  system  might  be  fair  in 
a  new  community  it  is  unjust  with  present  values." 

The  assumption  in  this  "objection"  is  that  the  government  has 
ever  impliedly  or  directly  guaranteed  to  maintain  land   values  at  the 

184 


highest  point  of  speculative  prices  to  which  the  cupidity  of  land  specu- 
lators has  been  able  to  boost  them  and  also  guarantee  any  net  profit 
''''  h>'k  ^P^f^l^.t^^e  prices.  This  assumption  is  so  ridiculous  as  to  dis- 
credit both  the  intelligence  and  sincerity  of  those  making  it  If  this  as- 
sumption were  correct,  plungers  on  the  stock  exchangi  would  be  en- 
titled to  receive  compensation  for  their  losses  and  losers  would  be  pen- 
sioned for  life  at  public  expense.  ^ 

That  it  is  not  unconstitutional  nor  confiscating  to  untax  buildines 
would  seem  adequately  determined  by  court  decisions  as  well  as  bv 
practice.  ^J 

A  case  recently  before  the  U.  S.  Supreme  Court  on  which  they  de- 
ivered  an  opmion,  April  4,  1910,  upheld  the  right  of  a  state  to  differen- 
tiate in  Its  system  of  taxation  (Southwestern  Oil  Co.  vs  Texas  217  U 
S.,  114,  30  Supreme  Court,  496,  affirming  100  Texas,  647)  A  Texas 
statute  imposed  a  2%  tax  upon  gross  receipts  from  any  or  all  oils  etc 
sold  at  wholesale  in  the  state  and  a  tax  amounting  to  2%  of  the'  cash 
market  value  sold  or  handled  or  disposed  of  in  any  manner  in  the  state 
This  was  upheld  by  the  state  court,  but  appeal  was  taken  to  the  U  s' 
Supreme  Court,  which  affirmed  the  state  court  in  the  following  opinion- 
The  Fourteenth  Amendment  was  not  intended  to  cripple  the  taxing 
power  of  the  states  or  to  impose  upon  them  any  iron  rule  of  taxation 
This  court  will  not  speculate  as  to  the  motive  of  a  state  in  adopting 
taxing  laws  but  assumes— the  statute  neither  upon  its  face  nor  bv  neces""- 
sary  operation  suggesting  a  contrary  assumption-that  it  was  adopted 
in  good  faith.  Except  as  restricted  by  its  own  or  the  Federal  Consti- 
tution a  state  may  prescribe  any  system  of  taxation  it  deems  best  and 
it  may,  without  violating  the  14th  Amendment,  classify  occupations  im- 
posing a  tax  on  some  and  not  on  others,  so  long  as  it  treats  equallV  all 
in  the  same  class.  An  occupation  tax  on  all  wholesale  dealers  in  certain 
specified  articles  does  not,  on  its  face,  deprive  wholesale  dealers  of  their 
property  witnout  due  process  of  law  or  deny  them  equal  protection  of 
the  law  because  a  similar  tax  is  not  imposed  upon  wholesale  dealers  in 
other  articles,  and  it  was  so  held  as  to  the  Kennedy  Act  of  Tex-s  in 
1905,  levying  an  occupation  tax  on  wholesale  dealers  in  coal  and  mineral 

A  Federal  Court  cannot  interfere  with  the  enforcement  of  a  state 
statute  merely  because  it  disapproves  of  the  terms  of  the  act,  questions 
the  wisdom  of  its  enactment  or  is  not  sure  as  to  the  precise  reason  in- 
ducing the  state  to  enact  it." 

^       The  power  of  the  Legislature  in  matters  of  taxation  is  broader  than 
in  almost  any  other  field.     In  the  case  of  Janet  vs.  City  of  Brooklyn 
99  N.  Y.,  300,  the  Court  of  Appeals  said :  ^         i^rooKiyn. 

"The  power  of  taxation  being  legislative,  all  the  incidents  are  within 
the  control  of  the  Legislature.  The  purposes  for  which  a  tax  should  be 
levied ;  the  extent  of  taxation ;  the  apportionment  of  the  tax ;  upon  what 
property  or  classes  of  persons  a  tax  shall  operate ;  whether  the  tax  shall 
be  general  or  hmited  to  a  particular  locality  and  in  the  latter  case  the 
fixing  of  a  district  of  assessment ;  the  method  of  collection  and  whether 
a  tax  shall  be  a  charge  upon  both  person  and  property  or  only  on  the 
land  are  matters  within  the  discretion  of  the  Legislature  and  in  respect 
to  which  this  determination  is  final." 

Discrimination  between  different  classes  of  property  or  different 
kinds  of  transactions  is  generally  recognized  in  our  present  law  Thus 
in  New  York,  transfers  of  stock  are  taxed  but  not  transfers  of  general 

185 


( 


'"' 


\\ 


■{  i 


I 


merchandise,  and  inheritances  are  taxed  at  various  rates  according  to  the 
value  of  the  property  affected  and  the  relationship  of  the  beneficiaries 
to  the  deceased  owner.  Mortgages  are  taxed  differently  from  personal 
property,  and  this  mortgage  tax  law  was  upheld  by  the  Court  of  Appeals 
in  a  strong  decision  in  the  case  of  People  vs.  Ronner,  reported  in  185 
N.  Y.,  page  285.  Similar  differentiations  exist  in  the  tax  laws  of  other 
states. 

The  tax  rate  on  buildings  in  Houston,  Texas,  was  in  one  year  re- 
duced to  1/3  of  the  tax  rate  on  land,  and  the  Legislature  of  Pennsyl- 
vania last  year  passed  a  law  reducing  the  tax  rate  on  buildings  in  Pitts- 
burgh and  Scranton  to  1/2  that  on  land,  but  the  courts  have  not  yet  de- 
clared the  law  invalid ;  while  land  in  Kansas  City,  Mo.,  benefited  by 
parks  is  assessed  with  a  large  part  of  the  cost  of  maintenance. 

Partly  through  regulation  by  the  Federal  and  state  governments, 
the  average  surpluses  earned  by  all  the  railroads  of  the  country  fell 
from  6.3%  in  the  years  1905,  1906,  1907,  to  4.4%  in  1911.  1912,  1913; 
but  this  fact  did  not  entitle  stockholders  to  remuneration  from  either 
the  Federal  or  state  governments. 

It  should  be  noted,  too,  that  "due  process  of  law"  is  contemplated, 
since  the  proposed  change  in  the  law  is  to  be  accomplished  by  the 
method  provided  in  the  Constitution. 

The  burden  of  proof  obviously  rests  upon  those  who  claim  that  the 
people  want  the  existing  system  while  opposing  the  referendum  on 
changing  it.  They  must  also  disprove  the  equally  obvious  fjict  that  the 
present  system  has  been  perpetuated  by  legislative  bodies  in  fact  repre- 
sentative of  and  controlled  by  land  speculators  and  other  real  estate  own- 
ers, and  not  representatives  of  the  people  as  a  whole.  It  is  not,  in  any 
real  sense,  the  fault  of  those  oppressed  by  the  present  system  of  taxation 
that  buildings  have  not  been  taxed  at  a  lower  rate  than  land  for  a  good 
many  years  at  least.  The  admission  that  more  or  most  of  the  ground 
rent  might  properly  have  been  taken  for  governmental  purposes  if  we 
had  started  that  way  (but  we  shouldn't  start  now)  is  tantamount  to 
claiming  that  repetition  of  a  wrong  transforms  such  wrong  into  a  virtu- 
ous act. 

2.  "Untaxing  buildings  will  reduce  the  taxes  on  the  homes  of  the 
wealthy." 

A  fair  test  of  this  claim  is  Fifth  Avenue.  If  buildings  had  been  un- 
taxed this  year,  the  mansions  on  the  east  side  of  Fifth  Avenue,  from  51st 
Street  north  to  77th  Street,  would  have  paid  in  round  figures  $334,000 
more  taxes  than  this  year's  levy. 

3.  "Untaxing  buildings  will  wipe  out  the  small  home  owner." 
The  taxes  on  a  $3,000  home  on  a  $1,000  lot  are,  outside  of  Manhat- 
tan and  The  Bronx,  about  $73.60.  With  buildings  untaxed,  the  total 
taxes  would  be  only  $29.10,  saving  in  taxes  $44.50.  It  is  also  claimed 
that  the  selling  price  of  land  would  be  reduced  by  the  increase  in  tax 
rate.  What  is  meant  is  that  the  increase  in  the  selling  price  of  land  will 
be  retarded.  The  average  annual  increase  in  land  values  (NOT  as- 
sessed land  values)  is  about  3J^%. 

The  selling  price  of  a  lot  at  $1,000  is  a  5%  net  ground  rental.  Un- 
taxing buildings  would  involve  an  increased  tax  rate  of  about  1.1% 
on  assessed  land  values  or  slightly  over  1/5  of  the  present  net  ground 
rent.  The  selling  price  of  the  $1,000  lot  might  be  reduced  by  about  1/5 
by  untaxing  buildings,  i.  e.,  by  about  $220,  IF  land  values  in  the  city^ 
were  stationary.     As  a  matter  of  fact,  they  are  not  stationary  but  are 

186 


increasing  in  most  sections  of  the  city.  The  natural  and  average  in- 
crease of  3%  in  the  selling  price  of  a  $1,000  lot  would  mean  an  increase 
of  $30  a  year. 

We  may  put  the  advantages  of  untaxing  buildings  to  the  home 
owner,  described  as  follows,  for  a  20-year  period: 

Increase  in  value  of  lot  (uncompounded)    $600 

Saving  in  taxes  at  $44.50  a  year  (excluding  interest)    890 

Total  profits    $1 .490 

Depreciation  in  capital  value  of  land  220 

Net   profits    $  i  ,270 

The  situation  might  be  put  instead  that  the  value  of  the  lot  of  this 
home  owner  instead  of  increasing  about  $600  in  20  years  would  increase 
only  about  $400,  while  the  outstanding  fact  is  that  THE  SAVING  IN 
TAXES  TO  THE  AVERAGE  HOME  OWNER  WITH  BUILDINGS 
UNTAXED  WOULD  BE  AT  4%  COMPOUND  INTEREST  OVER 
$1,000  OR  FIVE  TIMES  AS  MUCH  AS  ANY  POSSIBLE  DEPREC- 
IATION IN  THE  SELLING  VALUE  OF  HIS  LAND. 

Few,  if  any,  small  home  owners  buy  land  for  the  increase  in  land 
values.    They  buy  it  for  a  home.    Two  other  facts  should  be  considered  • 

a.  Within  25  or  30  years,  the  growth  of  the  city  will  require  the 
use  of  much  land  now  occupied  by  small  homes  for  tenements  or  busi- 
ness purposes  so  that  the  owners  will  secure  much  higher  prices  than 
they  otherwise  would.  This  movement  will  be  accelerated  by  regula- 
tions limiting  the  height  and  size  of  buildings  and  the  proportion  of  the 
lot  area  which  they  may  occupy  by  the  distribution  of  factories. 

b.  There  are  not  over  100,000  acres  outside  of  the  Borough  of  Man- 
hattan available  for  resident  purposes.  Allowing  16  lots  to  an  acre, 
this  means  only  1,600,000  lots.  The  population  of  these  boroughs  is  at 
present  over  3,000,000.  Within  a  quarter  of  a  century  the  population  of 
these  boroughs  will  be  probably  at  least  6,000,000,  and  within  half  a 
century  10,000,000,  even  at  the  present  rate  of  increase  for  the  next  25 
years. 

Probably  at  least  3/4  of  the  city's  population  will  live  in  tenements 
and  within  relatively  few  years  more  of  the  lots  of  the  city  used  for 
resident  purposes  will  provide  shelter  for  at  least  three  families. 

It  is  manifestly  unfair  that  one  man  should  secure  the  increase  in 
land  values  due  to  the  necessities  of  two  other  families — just  as  unfair 
in  principle  as  that  the  Astors  should  secure  the  increase  in  land  values 
due  to  the  necessity  of  tens  of  thousands  of  families.  Justice  is  qualita- 
tive, not  quantitative. 

4.  "It  will  reduce  taxes  in  the  skyscraper  district." 

It  is  true  that  taxes  on  7  or  8  of  the  large  skyscrapers  of  the  city 
would  be  reduced  by  a  few  thousand  dollars  if  buildings  were  untaxed. 
The  owners  of  these  buildings  are  bitterly  opposing  the  untaxing  ot 
buildings  because  they  know  it  will  stimulate  the  construction  of  more 
office  buildings  or  loft  buildings  in  their  vicinity,  and  reduce  rents  so 
that  they  will  not  get  any  of  the  advantage  of  the  reduction  of  the  taxes 
on  skyscrapers. 

The  district  below  Chambers  Street,  in  Manhattan,  would,  however 
have  paid  about  $1,600,000  more  taxes. 

5.  "New  York  City  is  overbuilt  now." 

Tenement  House  Commissioner  Murphy  states: 

187 


fi 


I 


! 


ill  I 


■J 


i 


Pi 


I 

|l 
ii 


"A  careful  census  of  the  city,  made  recently,  indicates  not  more 
than  5%  of  vacancies,  and  the  unanimous  testimony  of  agents  is  that 
renting  is  good." 

10%  of  vacancies  is  not  unusual.  It  takes  longer  to  construct  tene- 
ments than  for  babies  to  be  born,  or  immigrants  to  arrive  by  thousands. 

''Good,  renting"  for  agents  means  high  rents  for  tenants. 

In  1910,  Mr.  Lawrence  Veiller,  housing  expert,  stated : 

"We  have  80,000  buildings,  housing  nearly  3,000,000  people,  so  con- 
structed as  to  be  a  standing  menace  to  the  community  in  the  event  of 

fire. 

"In  no  other  city  is  there  so  great  congestion  and  overcrowding.  In 
no  other  city    do  the  poor  so  suffer  from  excessive  rents." 

The  Tenement  House  Committee  of  the  Charity  Organization  So- 
ciety and  the  Tenement  House  Department  of  the  City  have  recently 
prepared  a  pamphlet  on  housing  conditions  for  distribution  among 
tenants,  and  in  a  chapter  entitled,  "Don't  rent  dark  rooms,"  they  state: 
"Fresh  air  and  light  in  every  room  are  better  than  medicine.  Plants  can- 
not grow  in  the  dark,  neither  can  children.  How  often  have  you  gone  to 
the  doctor  or  dispensary  during  the  last  year?  Ask  him  about  dark 
rooms.  A  dark  room  is  a  consumption  factory.  Gas  bills  and  medicine 
bills  soon  equal  the  difference  in  rent  between  good,  light  rooms  and 
dark,  unhealthy  ones." 

They  frankly  admit  the  fact  that  New  York  City  is  oversupplied 
with  tuberculosis  factories,  but  no  one,  except  the  beneficiaries  of  the 
present  high  rents  prevalent  in  New  York  City,  will  claim  that  the  city 
is  overbuilt  with  either  tenements  or  homes. 

6.  "Money  will  not  be  loaned  if  there  is  any  danger  that  the  selling 
price  of  land  will  be  reduced." 

As  has  been  proven  above,  the  selling  price  of  land  will  not  be  re- 
duced below  the  present  figures  by  the  gradual  increase  in  the  tax  rate 
on  land,  and  the  depreciation  in  buildings  will  not  be  any  more  rapid 
under  the  proposed  untaxing  of  buildings. 

Most  of  the  water  has  already  been  squeezed  out  of  the  land  values 
of  New  York  City.  Any  loaning  institution,  therefore,  in  making  a  loan 
under  the  proposed  change  will  know  that  their  security  will  be  unim- 
paired, and  that  the  higher  tax  rate  on  land  will  not  affect  the  security 
of  investment. 

The  proposed  change  would  increase  the  tax  rate  on  land  only 
about  10  points  a  year,  while  during  the  three  years,  19(38,  1909  and 
1910,  the  average  increase  in  the  tax  rate  on  all  clases  of  property  was 
about  9  points  yearly.  There  was  no  panic  then  nor  any  unusual  num- 
ber of  foreclosures  of  mortgages.  The  borrower  of  money  to  construct 
buildings  hereafter  will  be  able  to  make  just  as  good  a  profit  on  his 
investment  in  buildings  as  to-day,  although  the  profits  on  his  investment 
in  land  will  be  reduced  by  the  extent  to  which  the  heavier  tax  rate  re- 
tards the  increase  of  land  values.  Improved  real  estate  will  still  be  as 
safe  an  investment  as  to-day,  since  the  change  goes  into  effect  so  slowly, 
and  the  result  will  be  discounted  a  year  or  two  in  advance  of  the  begin- 
ning of  the  operation  of  the  bill. 

As  pointed  out  in  Section  III,  the  competition  of  additional  capital 
will  work  to  lower  interest  rates  and  encourage  capital  to  take  a  smaller 
return. 

7.  "Savings  bank  depositors  will  lose  their  deposits." 

188 


Most  mortgages  are  made  for  a  period  of  only  3  to  5  years,  probably 
an  average  of  3J4  years.  Since  the  measure  goes  into  operation  so 
gradually  there  will  be  time  for  an  adjustment  of  gradual  reduction 
in  the  amount  of  the  loan,  if  such  should  be  necessary.  Loans  are 
limited  to  60%  of  the  appraised  value  of  property.  If  the  loan  exceeds 
this,  the  responsibility  rests  upon  the  loaning  company,  not  upon  the 
tax  system. 

As  pointed  out,  there  is  practically  no  danger  of  reduction  of  the 
value  of  property  due  to  the  tax  system  within  less  than  five  years. 
However,  any  mortgage  hereafter  given  by  savings  banks  could  protect 
the  interests  of  depositors  by  a  clause  providing  for  the  gradual  scaling 
down  of  the  mortgage  if  the  value  of  property  should  be  depreciated. 
Savings  bank  depositors  would  thereby  be  entirely  protected.  It  is 
worthy  of  note,  moreover,  that  where  the  untaxing  of  buildings  has  been 
tried,  in  part  or  in  whole,  there  has  been  no  calling  of  mortgages  or 
loans. 

8.  "Equities  will  be  wiped  out." 

The  preceding  paragraphs  of  this  section  show  that,  where  the 
equity  is  not  a  shoestring  equity,  as  is  often  the  case,  or  the  property 
has  been  overloaned,  the  equity  will  not  be  wiped  out  by  the  gradual 
reduction. 

If  a  man  has  speculated  in  vacant  or  under-improved  land  he  is  not 
entitled  to  any  sympathy  except  from  the  classes  who  are  speculating 
themselves. 

9.  "The  borrowing  capacity  of  the  city  will  be  reduced." 

The  opponents  of  this  measure  claim  that  there  will  be  an  enormous 
increase  in  the  number  and  size  of  buildings  and,  therefore,  frankly  ad- 
mit that  money  will  be  loaned,  while  also  admitting  that  the  assessed 
value  of  buildings  will  be  tremendously  increased,  and,  as  has  already 
been  pointed  out,  there  will  be  only  a  slight  reduction  in  the  assessed 
value  of  land. 

This  will  not  reduce  the  assessed  valuation  or  borrowin^i:  ability 
of  the  city.  The  experience  of  all  cities  where  the  tax  rate  on  buildings 
has  been  reduced  or  abolished  proves  this,  as  well  as  our  own  experience. 

The  tax  levy  upon  land  values  here  was  greater  by  $33,451 334  i^ 
1913  than  in  1906.     During  these  years: 

The  assessed  value  of  land  was  increased  by $1,223,658,604 

The  assessed  value  of  buildings  was  increased  by 837,165,390 

Total  increase  in  assessed  values  was $2,060,823,994 

All  this,  in  spite  of  the  increased  levy  on  land  values,  which  is  about 
2/3  of  the  increase  in  the  levy  on  land  if  the  tax  rate  on  buildings  were 
reduced  to  1%  of  that  on  land. 

It  is  thoughly  understood,  however,  as  pointed  out  in  Section  III, 
that  the  city  should  not  be  so  heavily  in  debt ;  and  one  of  the  primal  ad- 
vantages of  the  heavy  taxation  of  land  values  and  untaxing  buildings  will 
be  that  it  will  enable  the  city  to  pay  its  current  expenses  in  the  most 
equitable  way,  currently,  instead  of  running  into  debt  so  heavily.  The 
Constitution  states  that  the  indebtedness  of  any  county  or  city  shall  not 
exceed  "10  per  centum  of  the  assessed  valuation  of  the  real  estate  of 
such  county  or  city,  subject  to  taxation." 

The  RATE  of  taxation  is  not  mentioned.  Both  land  and  buildings 
in  New  York  City  have  been  taxed  as  low  as  $1.41  per  $100  of  assessed 
value;  and  they  were  just  as  much  subject  to  taxation  as  when  taxed 

189 


i 


'$ 


*l 

\ltj 
dil 


$2.48  (in  1909) ;  and  when  the  buildings  were  taxed  $2.48,  they  were  no 
more  subject  to  taxation  than  they  would  be  if  taxed  $1.03  or  $1.04  per 
$100  or  even  less.  Therefore,  the  claim  that  to  reduce  the  tax  rate  on 
buildings  to  i  %  of  the  tax  rate  on  land  would  mean  to  exempt  buildings 
and,  therefore,  would  ipso  facto  eliminate  the  assessed  value  of  build- 
ings, in  calculating  the  debt-incurring  capacity  of  the  city,  is  utterly 
illogical. 

10.  "Rents  will  be  increased," 

This  astounding  discovery  has  been  made  by  Mr.  Allan  Robinson, 
President  of  the  Allied  Real  Estate  interests  of  New  York,  and  is  based 
upon  the  primary  discovery  that  the  depreciation  in  the  value  of  build- 
ings will  have  to  be  paid  by  the  tenants.  Of  course,  the  tenant  has  been 
paying  this  constantly,  and  the  argument  further  adduced  that  interest 
will  be  increased,  so  increasing  the  cost  of  building,  has  already  been 
met  in  Section  II,  on  Economic  Advantages. 

11.  "There  will  be  an  intensive  use  of  land,  and  none  but  large 
buildings  put  up." 

That  this  is  illogical  is  proven  by  the  fact  that  under  the  present 
uniform  tax  rate  on  land  and  buildings,  as  enormous  structures  as  possi- 
ble have  been  erected.  The  same  landed  interests  that  have  fought  for 
years  the  effort  to  secure  reasonable  regulation  of  building  construction 
and  limitations  upon  the  height,  size  and  volume  of  buildings,  are  oppos- 
ing the  untaxing  of  buildings.  Lessening  the  height  of  tenements  is 
essential,  but  that  will  not  lessen  rents,  and  the  heavier  penalty  imposed 
upon  the  vacant  land  speculators  by  untaxing  buildings  will  lead  them 
to  support  a  movement  to  prevent  the  construction  of  a  few  enormous 
buildings  so  as  to  corner  the  office,  factory  or  tenement  market. 

12.  "Untaxing  buildings  will  increase  congestion." 

This  is  merely  the  confounding  of  more  floor  space  and  more  peo- 
ple, a  mistake  so  stupid  as  to  be  unworthy  of  any  intelligent  mind. 
Congestion  involves  people  per  acre,  and  also  per  room.  If  there  were 
no  tenants  in  the  Woolworth  Building,  there  would  be  no  congestion 
of  population  on  this  site. 

13.  "The  market  is  bad." 

It  may  be  freely  admitted  that  the  profits  of  land  speculation  arc  not 
quite  so  large  to-day  as  they  have  been  in  recent  years. 

If  the  moral  principle,  however,  is  right,  that  portion  of  the  community 
is  entitled  to  more  of  the  ground  rent  than  they  are  receiving  to-day.  This 
is  not  altered  by  the  fact  that  land  speculators  are  not  making  ordinary 
speculative  profits,  while  the  water  is  being  squeezed  out  of  land  values. 

Moreover,  this  would  improve  the  real  estate  market,  particularly  in 
brokerage,  through  stimulating  the  locating  of  factories  in  New  York 
City.  It  is  true  that  much  of  the  labor  and  factory  legislation  recently 
enacted  in  this  State  will  increase  the  cost  of  doing  business  here ;  but 
most  of  this  cost  can  be  shifted,  and  has  been  shifted  by  the  manu- 
facturers wherever  possible,  on  to  the  consumers. 

14.  "Untaxing  buildings  will  impoverish  widows  and  orphans." 
This  charming  illustration  of  widows  and  orphans  is  the  perennial 

spectre  of  privilege.  The  City  of  New  York  is  admitting  the  right  of 
every  resident,  not  subject  to  deportation  or  to  removal  to  the  place  in 
this  country  where  he  has  his  legal  residence,  to  be  supported  at  public 
expense.  This  recognized  right  justifies  the  city,  if  any  such  justifi- 
cation were  required,  in  adopting  an  equitable  policy  of  taxation. 

190 


It  is  highly  improbable  that  any  widows  or  orphans  would  be 
seriously  affected  by  this  change  going  into  effect  so  gradually  as  is 
proposed.  The  present  system  hurts  widows  and  orphans  tenfold  as 
much  as  any  possible  reduction  in  the  income  of  these  classes  through 
the  proposed  change  in  the  system  of  taxation. 

15.     "To  exceed  the  2%  tax  limit  would  be  unconstitutional." 

The  State  Constitution  (Art.  VIII,  Sec.  10)  says: 

"The  amount  hereafter  to  be  raised  by  tax  for  county  or  city  pur- 
poses, in  any  city,  or  county  containing  a  city,  of  over  100,000  inhabitants, 
or  any  such  city  of  this  State,  in  addition  to  providing  for  the  principal 
and  interest  of  existing  debt,  shall  not  in  the  aggregate  exceed  in  any 
one  year  2  per  centum  of  the  assessed  valuation  of  the  real  and  personal 
estate  of  such  county  or  city,  to  be  ascertained  as  prescribed  in  this 
section  in  respect  to  county  or  city  debt." 

The  assessed  value  of  real  estate  (1913)  was  $7,567,786,280.  The 
assessed  value  of  personal  estate  (1913)  was  $325,421,340.  Total,  $7,- 
893,207,620.  Two  per  centum  of  this  assessed  value  of  real  and  personal 
estate  is  $157,864,152.  The  debt  limit  (interest  and  principal)  is  about 
$70,000,000.    Total  revenue  that  may  be  raised  by  tax,  $207,864,152. 

Out  of  the  city's  budget  this  year  of  nearly  $193,000,000,  only  about 
$170,000,000  was  raised  by  tax;  the  balance  by  water  rates,  school 
money  from  the  State,  rentals,  license  fees,  etc.  In  other  words,  the  City 
of  New  York  could  have  raised  at  least  $38,000,000  more  revenue  this 

year  by  tax. 

As  has  been  demonstrated  earlier,  there  will  be  no  reduction  m  the 
total  assessed  value  of  real  estate  in  the  city,  but  a  decided  increase,  with 
buildings  untaxed,  so  that  even  were  the  debt  service  reduced,  the  city 
could  raise  probably  $40,000,000  annually  more  revenue  by  tax  without 
affecting  the  constitutional  provision  cited.  The  only  result,  since  no 
substitute  for  a  tax  is  suggested,  will  be  to  enlarge  the  taxable  base  of 
the  city  so  it  can  secure  more  revenue  without  exceeding  2  per  centum 
of  the  assessed  value  of  real  and  personal  estate. 

V.     RESULTS  OF  UNTAXING  BUILDINGS   ELSEWHERE. 

Prof.  E.  R.  A.  Seligman  stated  to  Mayor  Gaynor's  Congestion  Com- 
mission : 

"It  must  be  stated,  however,  in  defense  of  the  claim  that  the  exemp- 
tion of  improvements  is  desirable,  in  so  far  as  I  know,  no  town  or  city 
which  has  gone  over  to  the  exemption  of  improvements  has  receded 
from  that  position." 

(I)     VANCOUVER,  B.  C. 

It  is  true,  as  claimed  by  the  opponents  of  untaxing  buildings  and  in- 
creasing the  tax  rate  on  land  values,  that  the  value  of  buildings  con- 
structed in  Vancouver  in  1913  was  not  so  large  as  in  1912.  Prof.  Chas. 
S.  Bullock,  of  Harvard  University,  states  that  the  value  of  buildings  for 
which  plans  were  filed  from  January  to  May,  inclusive  (1914),  "is  $1,- 
820,000,  indicating  total  operations  of  between  four  and  five  million  dol- 
lars for  the  year  1914."  Prof.  Bullock  adds,  "If  the  single  tax  rather 
than  the  previous  period  of  flush  times  accounts  for  the  increase  in 
building  operations  from  1909  to  191 2,  it  must  accept  the  responsibility 
for  the  slump  of  1913,  1914-" 

As  Prof.  Bullock  admits  elsewhere,  however,  nothing  approximating 
the  "single  tax"  has  been  in  operation  in  Vancouver,  nor  has  it  in  any 

191 


i 


111 


other  city  where  buildings  have  been  untaxed.  The  tax  on  land  values 
in  Vancouver  takes  only  about  20%  of  the  ground  rent,  while  in  New 
York  City  it  takes  nearly  30%,  and  under  the  "single  tax"  it  would 
take  approximately  100%.  There  has  naturally  been  land  speculation, 
and  vvild  land  speculation,  for  Vancouver,  instead  of  taxing  land  values 
has  plunged  heavily  into  debt,  besides  taxing  many  things  in  addition  ta 
land,  just  as  New  York  City  has  done  for  the  same  reason :  it  is  profitable 
to  land  speculators  and  money  lenders. 

'^F^^^'  ^"^^^^^  ^^^^s  to  observe  that  although  the  total  value  of 
buildings  constructed  in  Vancouver  was  only  $10,423,000  in  1913,  in- 
stead of  $19,388,000  as  in  1912,  the  per  capita  value  of  new  building 
construction  was  still  in  1913  $91.30,  as  against  $92  in  1912,  i.  e.,  prac- 
tically  the  same,  and  the  per  capita  construction  both  years  was  larger 
than  It  was  in  1906,  with  buildings  taxed  at  half  the  rate  on  land— $82.85. 
r\  A'  -^  ^^^  ^^^"  ^  ^^"^  boom  in  Vancouver  during  the  past  10  years. 
Ordinarily,  under  such  circumstances,  rents  increase  very  rapidly  Not 
only  have  rents  NOT  increased  in  Vancouver  but  they  have  decreased 
materially,  and  this  reduction  is  deplored  by  some  of  the  people  who  most 
loudly  assert  that  untaxing  buildings  has  been  a  failure  in  Vancouver. 
That  rents  would  have  been  reduced  still  more  had  land  values  been 
taxed  twice  as  heavily  is  self-evident.  A  comparison  of  the  per  capita 
value  of  buildings  constructed  in  New  York  City  and  in  Vancouver  is- 
illuminating. 

The  per  capita  constructing  of  buildings  in  the  two  cities  for  given 
years  was  as  follows: 

New  York. 
1910 $45.47 

1913 27.63 

Vancouver. 

1909 $92.00 

1913 91.30 

^914 43-86  (estimating  construction  at  $5,000,000* 

and  taking  1913  population). 

The  population  of  Vancouver  is  stated  to  be  only  about  the  same 
this  year,  1914,  as  in  1913.  The  per  capita  construction  of  buildings 
was  also  nearly  three  times  as  large  in  1913  as  in  1902,  with  buildings 
taxed  at  j^  the  tax  rate  on  land. 

It  will  be  seen  that  the  impetus  to  the  construction  of  buildings 
through  untaxing  them,  even  with  land  values  decidedly  undertaxed  so 
as  to  stimulate  land  speculation,  is  nearly  twice  as  eflFective  in  Van- 
couver in  its  terrible  "slump"  year  as  in  New  York  City  in  1913,  and 
more  than  twice  as  great  in  a  banner  year,  1913,  in  Vancouver,  as  in  a 
banner  year  in  New  York  City,  1910. 

It  is  manifestly  unfair,  however,  to  take  any  one  year  as  a  "slump"' 
or  "banner"  year  since  the  operation  of  economic  law  through  a  series 
of  years  is  necessary  to  test  it  effectively,  and  to  learn  what  its  work- 
ings are. 

The  result  in  Vancouver  of  untaxing  buildings  has  been  to  stimu- 
late the  construction  of  enough  buildings  to  reduce  rents,  and  it  has 
encouraged  home  ownership,  about  }i  of  the  wage  earners  owning 
their  homes. 

Vancouver's  experience  proves  that  the  results  of  untaxing  build- 
ings are  good,  and,  at  least  inferentially,  that  the  results  of  taxing  land 
values  heavily  would  be  better. 

192 


There  are  doubtless  land  speculators  in  Vancouver  who  would  like 
to  return  to  taxing  buildings,  which  merely  proves  that  human  nature 
is  not  extinct  in  Vancouver. 

(2).    EDMONTON,  ALBERTA. 

In  1901,  the  population  of  Edmonton  was  only  2,500;  this  year  it  is 
72,500.  Buildings  have  not  been  taxed  at  all  in  Edmonton.  There  was 
a  rental  tax  which  has  recently  been  abolished.  The  value  of  the  per- 
mits for  the  construction  of  buildings  issued  in  1912  was  $15,000,000,  as 
against  one  and  a  half  millions  in  1906. 
(3).     VICTORIA,  B.  C. 

Victoria,  B.  C,  40,000  population,  having  also  exempted  improve- 
ments, reports  that  the  building  permits  for  1912  were  eight  millions, 
against  only  four  millions  in  191 1. 
(4).     WINNIPEG. 

Winnipeg  in  1909  exempted  2/3  of  the  value  of  buildings.  In  a 
municipal  election  in  191 1,  24  out  of  28  candidates  declared  in  favor  ex- 
empting buildings  altogether. 

(5).  Perhaps  the  best  proof  of  the  advantages  of  untaxing  build- 
ings to  tenants  and  small  home  owners  and  legitimate  business  men. 
NOT  to  land  speculators  and  the  financial  interests,  is  the  fact  that 
despite  a  recession  in  Vancouver,  which  is  probably  temporary,  all  north- 
western Canada  is  following  suit  and  untaxing  buildings. 

The  third  biennial  report  of  the  Minnesota  Tax  Commission  (p. 
154),  states: 

"The  most  striking  feature  in  a  study  of  tax  reform  in  western 
Canada  is  the  strong  trend  throughout  the  country  in  the  direction  of 
the  Single  Tax  principle.  That  so  far  it  is  working  satisfactorily 
wherever  tried  is  generally  admitted,  even  by  opponents  of  the  prin- 
ciple. In  no  district  in  which  the  principle  has  been  applied  is  there 
any  noticeable  desire  to  return  to  the  old  system.  From  present  indi- 
cations it  is  safe  to  predict  that  within  the  next  10  or  20  years  the  Single 
Tax   principle   will    be   adopted   by   every   taxing   district   in    western 

Canada." 

Hon.  George  Langley,  Minister  of  Municipal  Affairs  in  Saskatche- 
wan, in  his  report  for  1912,  says: 

"That  scheme  of  taxation  whereby  buildings  and  improvements  are 
not  assessed  is  ever  increasing  in  popularity  throughout  the  province. 
In  our  rural  municipalities  and  local  improvement  districts,  the  land 
alone  has  always  borne  the  rates  of  taxation  and  there  is  not  the  slight- 
est tendency  to  change  the  system." 

In  Ontario,  300  municipalities  have  petitioned  for  power  to  reduce 

the  tax  rate  on  buildings. 

(6).  Throughout  the  province  of  Saskatchewan,  all  buildings  are, 
by  law,  exempt  40%,  but  by  law  of  191 1,  cities  and  towns  were  author- 
ized to  increase  this  exemption  and  about  20  of  them  have  done  so. 

(7).     TORONTO. 

Under  date  of  February  10,  1914,  Silas  C.  Thompson,  Secretary  of 
the  Tax  Reform  League  of  Eastern  Canada,  wrote : 

"The  City  of  Toronto,  by  vote  of  25,773  against  6,440,  decided  to 
ask  for  privilege  from  the  Legislature  to  reduce  the  tax  rate  on  build- 
ings, incomes  and  business  assessments  and  to  increase  the  rate  on 

land  values." 

(8).  The  Legislature  of  Pennsylvania  last  year  passed  a  law  gradu- 
ally reducing  the  tax  rate  on  buildings  in  Pittsburgh  and  Scranton  to 

193 


I 


II 


V^  that  on  land  values.  It  is  naturally  too  early  to  determine  any  definite 
results  although  it  may  be  noted  that  Pittsburgh  manufacturers,  and 
real  estate  operators  as  well,  are  advertising  the  change  in  the  tax  sys- 
tem as  an  advantage  to  prospective  manufacturers. 

(q\  The  experience  of  Houston,  where,  in  1912,  the  tax  rate  on 
buildings  was  reduced  to  about  1/3  of  the  tax  rate  on  land,  is  shown  in 
the  attached  copy  of  "The  Tenants'  Weekly,"  Vol.  i,  No.  15,  m  a  letter 
from  Tax  Commissioner  Pastoriza,  of  Houston. 

SUPPLEMENTARY  BRIEF,  SUBMITTED  BY  THE  SOCIETY  TO 

LOWER  RENTS  AND  REDUCE  TAXES  ON  HOMES. 

BENJAMIN  C.  MARSH,  EXECUTIVE  SECRETARY. 


Why  Construction  of  Buildings  of  Large  Volume  or  Size  Will  Not  Be 
Encouraged  By  Transferring  Taxes  Now  Levied  On  Buildings 

to  Land  Values. 

It  has  been  claimed  that  the  untaxing  of  buildings  and  heavier 
taxation  of  land  values  will  cause  many  enormous  buildings  to  be  con- 
structed  The  Heights  of  Buildings  Commission  investigated  this  ques- 
tion fully  in  1913,  and  reported  that  buildings  of  enormous  volume  are 
n^  commercially  profitable.  We  quote  from  their  report  (pp.  19-21): 
not  comm         J  ^^^  ^  ^^t  returns.  Most  of  them  pay  only 

moderate   returns      The   cost   per   cubic   foot  of   tall   buildings   is 
J^eater  than  that  for  low  buildings.    The  exact  difference  can  only 
be  approximated  because  there  are  so  many  factors  which  aflfect  the 
problem.     However,  the  very  tall  buildings  demand  many  things 
out  of  proportion  to  their  increased  bulk.     All  pipmg  has  to  be 
made    disproportionately    heavier;    special    pumps    and    relays    of 
Unks  have  to  be  provided.     Foundations  often  call  for  special  con- 
struction,  wind-bracing  assumes  an  importance,  long-run  elevators 
are  more  costly  than  !hort-run  elevators    the  extra  ^^pace    ake     u 
by  express  run  of  the  elevators  is  an  additional  cost     Tliu^  in  the 
aeeregate  the  total  cost  per  cubic  foot  of  a  very  tall  building  may 
bf 6^  to  75  cents  per  cubic  foot  where  a  low  building  of  the  same 
class  would  cost  only  40  to  50  cents  per  cubic  foot. 

"The  net  rentable  space  on  the  ground  floor  is  worth  on  the 
average  as  much  as  that  of  the  third  to  the  eighth  floors  inclusive^ 
Loss  If  rentable  ground  floor  space  is  a  ways  serious  and  must  be 
compensated  for  in  other  ways  if  the  building  is  going  to  pay.  The 
exceptional  size  of  the  columns  and  the  exceptional  space  taken 
by  Ses  and  ducts  on  the  lower  floors  alone,  have  a  serious  eflfect 
on  the  net  rentable  area.  However,  the  great  item  of  waste,  m  he 
hU  buUdings,  is  the  big  loss  of  valuable  renting  space  on  he 
lower  floors  d^e  to  the  dead  run  of  the  express  elevators  to  the 
uD^er  floors  This  amounts  to  from  50  to  65  square  feet  per  ele- 
vator per  floor.  In  a  30-story  building  with  30  elevators,  this 
means  on  the  ground  floor  1,800  square  feet  given  up  to  elevators 
Tnd  at  leas  as  much  again  given  up  to  the  lobby,  so  that  about  4,000 
sjire  feet  are  loss.     As  this  ground  floor  space  in  such  buildings 

194 


often  rents  at  $20  per  square  foot,  the  loss  of  the  building  is  $80,- 
000  on  this  floor  alone.  A  lo-story  building  would  save  two-thirds 
of  this.  The  loss  on  the  floors  above,  due  to  the  dead  run  of  the 
elevators,  also  amounts  to  a  surprising  total,  all  of  which  would  be 
saved  in  a  10-  to  12-story  building.  This  space  on  the  lower  floors 
more  than  counterbalances  the  profit  on  the  upper  floors.  Every 
building,  according  to  its  shape,  size,  location,  and  use,  has  its 
economic  limit. 

"But  even  though  a  high  building  may  pay  a  moderate  net  re- 
turn as  long  as  it  is  isolated  and  surrounded  by  low  buildings,  so 
that  all  its  floors  and  offices  are  light  and  attractive,  the  result 
may  be  very  different  after  it  is  surrounded  by  similar  buildings, 
shutting  oflF  light  and  reducing  rentals  on  the  lower  floors.  As  a 
rule,  in  an  area  in  which  high  buildings  predominate,  the  rentals  are 
lowest  and  the  percentages  of  vacancies  greatest  on  the  lower 
floors  above  the  second.  If,  before  the  high  buildings  development, 
the  owners  in  such  districts  could  have  covenanted  among  them- 
selves to  limit  heights  and  enlarge  courts,  it  would  undoubtedly 
have  been  to  the  advantage  of  all  concerned. 

"The  real  estate  interests  which  a  decade  ago  were  most  active 
in  opposing  the  adoption  of  a  height  limit  in  Boston  are  to-day 
among  its  staunchest  supporters.  The  consensus  of  opinion  among 
real  estate  men  in  Boston  is  that  the  height  limit  instead  of 
depreciating  land  values  or  retarding  the  improvement  of  property, 
has  been  an  unqualified  success." 

MR.  CLARENCE  H.  KELSEY,  who  has  appeared  before  your 
Committee,  stated  to  the  Heights  of  Building  Commission,  September 
24,  1913  (PP-  238-239)  : 

"High  buildings  will  make  present  streets  and  sidewalks  inade- 
quate for  traffic. 

"The  present  sewer  system  was  not  constructed  to  serve  high 
buildings.  If  the  city  is  to  be  developed  with  12-  and  14-story 
buildings,  its  entire  subsurface  will  have  to  be  rebuilt. 

"High  buildings  make  it  impossible  to  forecast  real  estate 
values.  They  have  brought  the  business  section  into  the  residence 
section."  Mr.  Kelsey  didn't  know  where  a  high-class  retail  section 
could  be  developed. 

"It  is  becoming  increasingly  more  difficult  to  borrow  money 
with  which  to  erect  high  buildings.  There  has  been  a  decided 
change  in  the  attitude  of  the  insurance  companies  and  the  savings 
banks  in  granting  mortgages  on  skyscrapers. 

"High  buildings  encourage  the  wrong  kind  of  speculation." 
Mr.  Kelsey  thought  it  better  to  have  12  low  buildings  owned  by 
12  men  than  4  high  buildings  owned  by  4  men.  It  is  not  well  to 
force  land  into  large  ownerships. 

"High  buildings  depreciate  other  land  values.  The  land  values 
south  of  23rd  Street  have  lost  every  bit  as  much  as  those  north  of 
23rd  Street  have  gained  by  the  erection  of  high  buildings.  The 
sweatshops  have  destroyed  the  Fifth  Avenue  section.  A  height 
limit  will  make  real  estate  values  more  stable  by  diffusing  them. 

"High  buildings  rob  their  neighbors  of  light." 

MR.  WILLIAM  E.  HARMON,  President  of  Wood,  Harmon  & 
Co.,  stated  (p.  233) : 

195 


V 


i 


ji 


I 


"Throughout  the  country  the  so-called  skyscraper  probably 
does  not,  on  the  average,  produce  a  net  income  of  over  3>4%  after 
a  provision  for  depreciation  has  been  made."  He  further  stated  that 
the  space  above  the  third  floor  in  such  buildings  rarely  brings  in  a 
net  return  over  the  current  interest  rate  on  the  cost  of  the  building 
alone,  without  giving  any  consideration  to  the  site  value.  He 
doubted  if  i  per  cent,  of  the  skyscrapers  in  America  pay  7  per  cent, 
over  a  series  of  years  when  a  proper  charge  has  been  made  for  de- 
preciation and  repairs. 

MR.  REGINALD  P.  BOLTON,  Consulting  Engineer,  September 
22,  1913,  stated  (p.  181) : 

'Increased   height  involves  increased  cost  of  construction  per 
cubic  foot  of  building. 

"Increase  of  height  involves  increase  of  cost  of  operation  and 
maintenance  of  all  tentable  space. 

"Excessive  height  injures  neighboring  properties  and  reduces 
local  rentals  by  creating  excessive  rentable  space. 

"Rentals  must  be  raised  in  proportion  to  height  of  a  building.^^ 

"Less  rentable  space  per  floor  is  available  as  height  mcreases. 
MR.  CHARLES  S.  BROWN,  of  Douglas  Robinson  &  Co.,  October 

I7>  1913  (PP-  192-194),  stated:  •  u  .u    u  •  u. 

"The  net  return  on  real  estate  does  not  mcrease  with  the  height 
of  buildings.  The  depreciation  is  larger  in  the  case  of  a  high  bui  d- 
ine  than  in  the  case  of  a  low  building."  He  knew  of  only  one  build- 
in!  where  the  owners  maintained  an  exact  and  elaborate  sinking 
fund  of  the  structural  loss.  In  his  opinion,  the  loft  buildings  of  say 
9  and  10  stories,  produce  the  best  return.  "None  of  the  very  high 
buildings  in  New  York  pay  a  good  return,  when  structural  deprecia- 
tion   etc..  is  considered;  they  are  also  extremely  difficult  to  sell 

"Hieh  buildings  do  not  pay.  Almost  every  one  who  is  familiar 
with  them  realizes  this  fact  and  knows  that  the  net  return  is  very 
small  and,  in  addition,  no  one  knows  what  deterioration  a  high 
structure  suffers,  but  every  one  does  know  that  every  year  the 
amount  of  the  upkeep  increases;  and,  now  that  real  estate  va me;  have 
fallen  in  New  York,  those  who  have  invested  in  these  high  buildings 
have  made  serious  losses,  much  greater  than  if  they  had  improved 
their  land  with  comparatively  low  buildings.  It  is  also  known  that 
in  the  case  of  tall  buildings  the  structural  depreciation  is  large,  ow- 
ine  to  the  great  amount  of  machinery  and  metal  in  them,  and  owing 
to  the  possible  changes  of  style  in  construction  and  arrangement 
which  are  continually  being  made." 

"High  buildings  lower  values  of  land  near  them.  In  theory  they 
should  not;  practically  they  do,  partly  because  they  cause  an  over- 
supjly  of  renting  space  which,  to  be  filled,  must  be  let  at  such  low 
prices  that  it  takes  tenants  from  other  bui  dings  near  by.     If  the 
supply  of  tenants  kept  pace  with  the  supply  of  ^^P^^^'^his  would 
nofoccur,  but,  in  the  case  of  New  York,  the  growth  of  ^he  city  has 
in  no  sense  been  equal  to  the  increase  of  high  buildings. 
The  claim  that  transferring  taxes  now  levied  on  buildings  to  land 
values  win  compel  the  construction  of  large  buildings  is  without  founda- 
tion in  Tact,  as  r'eal  estate  owners  and  builders  will  not,  as  a  body,  throw 
their  money  away. 

196 


Although  enormous  skyscrapers  are  earning  only  small  returns, 
even  when  fully  tenanted,  they  take  tenant?  av/nv  from  ^mailer  buildings, 
and  so  deprive  the  owners  of  smaller  buildings  of  a  fair  return  on  their 
investments. 

Financial  considerations,  as  well  as  justice,  will  prevent  multiplica- 
tion of  skyscrapers  under  the  proposed  change  in  the  tax  system. 


MEMORANDUM  SUBMITTED  BY  THE  SOCIETY  TO  LOWER 
RENTS    AND    REDUCE    TAXES    ON    HOMES    ON    SOME 
FOREIGN    PRECEDENTS    FOR    EXEMPTING    BUILD- 
INGS FROM  TAXATION  AND  HEAVIER  TAXATION 

OF  LAND  VALUES. 

(Information  Secured  From  Bulletin  of  U.  S.  Department  of  Labor  158, 

"Government  Aid  to  Home  Owning  and  Housing  of  the 

Working  People  in  Foreign  Countries.") 


EXEMPTION  OF  BUILDINGS  FROM  TAXATION  IN  PART  OR 

WHOLE. 

AUSTRIA. 

In  Vienna  and  the  provincial  capitals,  newly-erected  buildings  pay 
from  one-fourth  to  one-third  less  than  the  usual  state  rent  taxes,  the 
lower  rate  applying  to  dwellings  with  exclusively  small  apartments, 
erected  by  public  welfare  building  associations. 

Communes  are  also  authorized  to  levy  a  land  increment  tax,  and 
many  of  them  have  recently  done  so. 

BELGIUM. 

Societies  whose  sole  object  is  to  provide  dwellings  for  the  work- 
ing classes,  and  who  comply  with  the  building  laws,  are  exempted  from 
certain  stamp  duties,  registration  fees,  etc.  For  the  eighteen-year 
period,  1895  to  1912,  the  average  tax  exemption  for  165,455  houses  was 
$2,047.  Workmen's  dwellings  are  also  exempted  from  the  provincial 
and  communal  share  of  the  land,  the  window  and  the  door  taxes. 

CHILE. 

Owners  of  all  buildings  constructed  thereafter  in  conformity  with 
the  law  and  declared  by  proper  authority  to  be  sanitary  were,  by  a  law 
of  1906,  exempted  from  municipal  and  fiscal  taxes  for  a  period  of 
twenty-five  years. 

A  reasonable  amount  of  drinking  water  is  supplied  the  owners  of 
such  houses  at  ten  per  cent,  of  the  ordinary  price,  and  other  similar 
concessions  are  made  to  them. 


y 


FRANCE. 


By  an  act  of  1912,  a  "cheap  dwelling"  which  conforms  to  the  law 
is  exempted  from  the  land  tax  upon  as  much  of  the  ground  as  is  actually 
covered  by  the  building,  as  well  as  from  the  door  and  window  taxes, 

197 


I 


il 


ill 


i 

1 

1 
( 

for  a  period  of  twelve  years.    Building  and  loan  associations  for  cheap 
dwellings  are  also  exempted  from  registration  and  stamp  fees. 

GERMANY. 

By  a  law  of  1861,  a  reduction  of  the  general  house  tax  is  granted 
on  dwellings  of  artisans,  factory  workers,  etc.,  in  rural  communities  in 
which  the  tax  is  not  assessed  on  the  basis  of  actual  rents. 

By  the  Law  of  1891,  building  associations  whose  business  activity 
IS  limited  to  their  membership  are  exempt  from  the  income  tax,  and 
such  associations  whose  object  is  stated  in  their  by-laws  to  be  ex- 
clusively the  provision  of  sanitary  low  rent  buildings  are  exempted 
from  the  occupation  tax. 

These  and  similar  associations  are  alst)  exempt  from  the  stamp  tax. 

Twenty-four  cities,  each  with  a  population  of  over  50,000,  have 
granted  exemption  or  respite  from  payment  of  street  construction  costs, 
or  of  ground  or  house  taxes. 

"The  activity  of  the  modern  land  reformers  is,  to-day,  concen- 
trated in  a  vigorous  agitation  for  the  adoption  of  a  ground  tax,  ac- 
cording to  the  actual  value  of  the  ground,  and  of  an  unearned  increment 
tax." 

A  rapidly  progressive  tax  is  levied  upon  increments  of  land  values 
with  certain  exemptions  for  small  holders.  Fifty  per  cent,  of  this  tax 
goes  to  the  Empire,  ten  per  cent,  to  the  Federal  States  for  administra- 
tion and  collection,  and  forty  per  cent,  to  the  communes.  Several  hun- 
dred cities  levy  this  tax,  and  the  total  yield  was  about  $9,500,000  in 
1912. 

GREAT  BRITAIN. 

The  following  recommendation  of  the  English  Parliamentary  Land 
Enquiry  Committee  is  given  in  the  Department  of  Labor  bulletin: 

"That  an  official  inquiry  shall  be  undertaken  to  ascertain  how 
such  transit  facilities  [as  are  needed]  can  best  be  provided  and 
financed,  especially  how  the  increment  in  land  values  due  to  new 
transit  schemes  can  be  secured  by  the  authority  providing  them." 
The  following  recommendations  of  this  Committee  are  not  p^iven 
in  the  bulletin: 

"All  future  increases  in  local  expenditure  that  are  chargeable 
on  the  rates  should  be  met  by  a  rate  upon  site  values." 

"Assuming  that  the  subventions  paid  out  of  Imperial  taxation 
in  aid  of  rates  are  substantially  increased,  existing  expenditure 
should  be  met  in  part  by  a  penny  rate  on  capital  site  value." 

"On  the  same  assumption,  local  authorities  should  be  given  the 
option  of  raising,  by  a  rate  upon  site  values,  such  further  rates  as 
they  think  fit." 

"We  should  emphasize  the  fact  that  in  alterations  of  the  pres- 
ent rating  system,  in  the  direction  of  placing  a  larger  proportion  of 
the  burden  upon  the  site  and  a  lower  proportion  on  the  building,  is 
to  be  found  one  of  the  most  hopeful  methods  of  substantially  re- 
ducing the  cost  at  which  satisfactory  housing  accommodations  can 
be  provided  for  the  workingman." 

HUNGARY. 

Nearly  all  the  larger  cities  have,  for  many  years,  granted  exemptions 
from  local  taxes  on  newly-erected  buildings  for  fifteen  or  even  eighteen 
years. 

198 


In  1870  permanent  exemption  irom  state  taxes  was  granted  to 
dwellings  allotted  without  charge  to  industrial  and  agricultural  laborers 

by  their  employers. 

In  1907  permanent  exemption  from  state  taxes  was  granted  on  all 
company  houses  complying  with  the  sanitary  laws  and  built  to  be 
rented  or  sold  on  easy  instalments  to  workmen ;  also  a  provisional  ex- 
emption for  twenty  years  from  state,  municipal  and  certain  communal 
taxes  was  granted  to  new  houses  to  be  sold  or  rented  to  workmen  either 
by  employers  or  others  engaged  in  housing  work. 

ITALY. 

Communes  are  empowered  to  construct  people's  dwellings  ex- 
clusively to  be  rented,  and  people's  lodging  houses,  whenever  the  sup- 
ply of  such  dwellings  is  inadequate,  and  the  former  are  exempted  from 
taxes  for  ten  years,  the  latter  for  twenty  years,  as  are  also  similar  build- 
ings constructed  by  co-operative  societies.  Communes  that  find  it  neces- 
sary to  encourage  the  construction  of  dwellings  are  empowered  to  im- 
pose a  tax  of  three  per  cent,  on  the  value  of  unused  building  sites.  In 
Rome,  half  of  this  tax  is  paid  to  the  Association  for  Low  Cost  Dwcll- 

ine:s  in  Rome. 

ROUMANIA. 

Houses  constructed  by  societies  or  individuals  (particularly  em- 
ployers) interested  in  housing  work  are  exempted  from  taxation,  per- 
manently or  temporarily. 

SWITZERLAND. 

In  Geneva,  workmen's  dwellings  are  exempted  from  public  taxes. 


199 


n 


ill 


I 


i 


MEMORANDUM  SUBMITTED  BY  THE  ADVISORY  COUNCIL 
OF  REAL  ESTATE  INTERESTS,  OCT.  24,  1914,  ON  UNTAX- 

ING  IMPROVEMENTS  ON  LAND. 

A  new  Herrick-Schaap  bill  (named  after  its  last  sponsors)  will  be 
submitted  to  the  Legislature  of  the  State  of  New  York.  It  contains 
the  same  provisions  as  its  predecessor,  the  SuUivan-Shortt  Bill,  which 
was  defeated  in  191 1.  These  bills  are  known  as  the  "half-tax"  bills  be- 
cause they  aim  to  divide  the  tax  on  buildings  and  other  improvements 
into  two  parts,  one  to  be  levied  on  the  improvements,  and  the  other  to 
be  added  to  the  present  tax  on  land.  This  will  result  in  a  '*half-tax" 
on  buildings  and  an  extra  tax  on  land. 

The  bill  sets  forth  that  10%  of  the  tax  on  buildings  shall  be  taken 
off  each  year  for  five  years  and  added  to  the  land  tax.  It  should  be 
understood  that  the  plan  is  a  half-way  station  to  the  Henry  George 
single  tax,  by  which  all  taxes  (instead  of  half)  are  to  be  taken  from 
buildings  and  placed  on  land.  The  principles  applying  to  both  half 
tax  and  single  tax  are  the  same.  The  single  tax  theory  is  that  land  and 
air  and  water  are  natural  products  and  belong  to  mankind  in  general  so 
no  individual  should  have  exclusive  ownership  of  them ;  while  build- 
ings and  other  improvements  are  the  products  of  labor  and  should  be 
exclusive  property  of  the  persons  who  create  them.  To  carry  out  this 
theory  the  single  taxers  propose  to  leave  the  land  in  possession  of  its 
owners  but  to  levy  upon  it  a  tax  equal  to  its  producing  power,  or  rents, 
so  that  the  possessors  of  the  land  cannot  have  its  income,  which  will 
be  divided  among  the  community  to  meet  the  burdens  of  the  govern- 
ment.   This  is  a  fair  statement  of  their  plans. 

A   HENRY   GEORGE   THEORY. 

Perhaps  some  quotations  from  "The  Conditions  of  Labor,"  by 
Henry  George,  will  not  be  amiss. 

"Being  created  individuals  with  individual  wants  and  powers, 
men  are  individually  entitled  (subject,  of  course,  to  moral  obligations 
that  arise  from  such  relations  as  that  of  the  family)  to  the  use  of 
their  own  powers,  and  the  enjoyment  of  the  results.  There  thus 
arises,  anterior  to  human  law,  and  deriving  its  validity  from  the 
law  of  God,  a  right  of  private  ownership  in  things  produced  by  labor, 
a  right  that  the  possessor  may  transfer,  but  of  which  to  deprive 
him  without  his  will  is  theft.  This  right  of  property  originating 
in  the  right  of  the  individual  to  himself,  is  the  only  full  and  com- 
plete right  of  property.  It  attaches  to  things  produced  by  labor, 
but  cannot  attach  to  things  created  by  God.  *  *  *  We  propose 
leaving  land  in  the  private  possession  of  individuals,  with  full  lib- 
erty on  their  part  to  give,  sell,  or  bequeath  it,  simply  to  levy  on  it 
for  public  use  a  tax  that  shall  equal  the  annual  value  of  the  land 
itself,  irrespective  of  the  use  made  of  it,  or  the  improvements  on 
:       it." 

200 


LAND  AS  A  LABOR  PRODUCT. 

It  is  to  be  seen  that  the  whole  theory  is  based  upon  the  idea  that 
land  is  not  the  product  of  labor.  If  it  be  shown  that  in  a  civilized  com- 
munity   land  is  a  product  of  labor,  the  theory  falls  to  the  ground. 

Let  us  examine  this  idea  in  detail.  No  one  will  question  that  land, 
air,  and  water  in  a  new  community  are  natural  products  common  to 
everyone,  but  like  every  other  natural  product,  they  are  converted  easily 
into  products  of  labor.  Our  friend,  the  fruit  grower,  buys  compressed 
air  in  cylinders  from  a  concern  which  takes  this  natural  product  and 
compresses  it.  He  uses  it  as  a  motive  power  to  spray  his  trees.  In 
my  offices  we  use  bottled  water  which  we  buy  from  someone  who  col- 
lects this  natural  product  and  sells  it  to  us.  Miners  take  gold  and 
precious  stones  and  coal,  and  oil,  out  of  the  earth,  and  after  they  have 
treated  them  by  various  forms  of  human  labor,  either  in  manufacture 
or  transportation,  exchange  them  for  other  products  of  human  labor. 

When  our  forefathers  stepped  upon  Plymouth  Rock,  they  found  be- 
fore them  an  unbroken  forest,  a  natural  product.  It  had  no  selling  value. 
They  chopped  down  trees,  pulled  the  stumps,  blasted  or  picked  off  the 
rocks  and  stones,  filled  the  ravines,  built  roads,  and  converted  the  land 
into  a  product  of  human  labor.  Anyone  could  do  so  who  would.  Now  it 
is  proposed  to  lay  a  tax  on  that  land  which  shall  be  equal  to  its  pro- 
ducing power,  because,  they  say,  the  community  is  entitled  to  the  income 
and  not  the  individual  who  expended  his  labor  on  it,  or  his  successor. 
Perhaps  it  will  be  said  that  land  in  the  cities  is  not  farming  land,  and 
the  same  reasoning  will  not  apply. 

In  the  beginning  of  the  city,  land  was  free  to  all.  Some  men  worked 
on  the  land  and  converted  it  into  farms,  others  invested  their  capital  in 
merchandise,  all  helped  to  build  up  the  city.  The  man  who  made  bricks, 
which  were  the  product  of  his  labor,  sold  some  and  bought  land  with 
his  profits.  He  wanted  the  land,  others  wanted  the  bricks.  Out  of  his 
savings,  he  paid  the  taxes  on  the  land  to  carry  on  the  government  and 
assessments  to  build  streets  and  sewers  and  lay  pavements  and  pre- 
pare the  land  for  the  time  it  would  be  needed  for  buildings.  The  bricks 
were  the  primary  product  of  his  labor,  but  the  land  no  less  represented 
his  labor,  and  was  the  product  of  it  in  the  wider  sense.  While  he  held 
the  land,  he  had  to  go  without  interest  on  his  original  capital,  the  taxes 
and  assessments. 

LAND  AS  A  SAVINGS  BANK. 

All  of  these  items  went  into  the  land  as  they  would  into  a  savings 
bank,  some  day  to  be  returned,  he  hoped.  Finally,  a  demand  came  for 
his  land,  as  it  had  for  his  bricks,  and  he  sold  it,  sometimes  with  a  profit, 
sometimes  without.  The  community  encouraged  him  to  put  his  savings 
into  land.  What  can  be  said  of  an  attempt  to  take  it  away?  It  may 
be  said  again  that  it  is  not  the  intention  to  take  away  the  land  from 
his  possession.  This  is  true,  but  it  is  also  true  that  the  plan  is  to  take 
away  its  selling  value  by  taking  away  its  income  or  its  potential  power 
to  produce  income. 

A  lot  is  worth  a  sum  upon  which  it  will  produce  a  fair  return  after 
the  taxes  have  been  paid.  A  fair  return  is,  let  us  say,  5%.  It  is  worth 
$1,000  if  it  will  produce  $50  (5%)  and  the  taxes,  say  2%,  or  $20,  which 
is  $70  in  all.  If  the  taxes  are  raised  to  3%,  the  income  will  be  reduced 
to  $40  and  the  lot  will  be  worth  only  $800  to  sell.     If  the  taxes  are  in- 

201 


I'  r 


creased  to  4%,  the  income  will  be  $30,  and  the  selling  value  $600  and, 
finally,  if  the  tax  is  increased  to  7%,  the  entire  income  will  be  taken  and 
the  lot  will  have  no  selling  value  at  all. 

Who  will  pay  $1,000  for  a  lot  if  he  cannot  sell  it  again  for  the  same 
amount,  or  if  he  cannot  gain  an  income  from  it  on  that  sum?  If  the 
income  is  taken  away,  the  selling  value  of  the  lot  is  lost.  This  means 
that  thousands  and  thousands  of  small  owners  who  now  have  their 
savings  in  a  home  or  tenement  upon  which  there  is  a  mortgage,  and 
whose  equity  only  equals  the  selling  value  of  the  land,  will  see  their 
mortgage  get  the  property  and  their  investments  wiped  out. 

FALSITY  OF  THE  CHEAP  RENT  THEORY. 

It  is  thought  that  taking  away  the  selling  value  of  the  land  will 
make  it  possible  for  men  to  build  homes  on  it  and  have  cheap  rents,  and 
escape  the  congestion  of  the  cities.  Let  us  examine  that  theory.  Un- 
doubtedly, the  first  effect  would  be  to  make  vacant  land  cheap  in  lo- 
calities where  improvements  such  as  regulating  and  grading,  sewering, 
and  paving,  have  been  paid  for,  because  these  investments  as  well  as 
the  original  capital  invested  in  the  land  would  be  lost;  but  as  soon  as 
these  lands  were  occupied,  who  would  invest  in  other  lands,  years  before 
they  were  needed  for  dwellings,  and  pay  the  taxes  and  assessments  neces- 
sary to  convert  these  lands  into  building  lots  suitable  for  a  city? 

FALLACY  OF  THE  RELIEF  OF  CONGESTION  THEORY. 

Now  they  are  ready  to  relieve  congestion  in  the  city  long  before 
there  is  any  demand  for  it.  On  what  would  the  assessments  be  levied 
if  the  lands  had  no  selling  value?  Who  would  advance  the  money  for 
these  improvements?  Again,  if  the  tax  on  the  building  is  half  that  on 
the  land,  the  tendency  would  be  to  build  upon  as  much  of  the  land  as 
possible  and  have  most  of  the  investment  in  the  building.  If  we  ex- 
empt the  buildings,  the  owners  of  skyscrapers  will  get  more  benefit 
than  the  owners  of  the  small  private  houses.  It  is  to  be  seen  that  a 
worse  congestion  would  occur  than  any  we  now  have,  and  rents  would 
rise  as  the  demand  increased.  In  a  few  years  they  would  be  bigger 
than  they  are  now.  If  inducements  were  not  made  to  investors  to  go 
out  into  the  suburbs  and  prepare  them  for  buildings  when  congestion 
in  the  city  shall  demand  it,  there  would  be  no  development  of  the 
suburbs.  The  building  of  a  Chinese  wall  around  the  present  city 
would  be  no  more  effective  to  prevent  further  expansion  than  a  law 
which  forbids  profits  from  investments  on  land. 

It  is  hard  to  understand  the  argument  that  buildings  and  improve- 
ments should  be  exempted  from  taxes.  The  object  of  taxes  is  to  sup- 
port the  government  in  the  discharge  of  its  functions,  such  as  the  opera- 
tion of  the  Fire  Department  and  the  Police  Department,  and  the 
Courts,  and  all  its  other  activities.  What  are  these  for  more  than  foi 
the  preservation  of  buildings,  and  other  improvements?  Vacant  prop- 
erty does  not  need  the  Fire  Department,  or  the  Police  Department,  or 
the  Courts,  yet  it  is  proposed  to  relieve  buildings  and  improvements 
which  are  the  direct  beneficiaries  of  the  tax,  and  place  the  burden  on 
land,  which  gets  little  or  no  direct  benefit  from  it. 

The  larger  the  ratio  which  the  value  of  a  building  bears  to  the 
whole  investment,  the  greater  the  need  of  governmental  functions  sup-^ 

202 


ported  by  the  tax;  but  the  single  tax  would  exempt  the  building  and 
charge  the  land. 

Another  fact  which  appears  to  be  forgotten  is  that  the  building 
is  bound  to  wear  out  or  become  out  of  date,  and  the  only  chance  the 
owner  has  to  offset  the  diminishing  value  of  his  building  lies  in  the  in- 
crease in  the  value  of  his  land.  If  he  is  denied  the  increase  in  the  value 
of  his  land,  he  must  charge  higher  rents  so  as  to  provide  a  sinking  fund 
for  his  building.  This  necessary  consequence  explodes  the  lower  rent 
theory. 

Present  investments  on  bond  and  mortgage  are  made  on  the  se- 
curity of  the  land  as  well  as  the  building.  The  fact  that  the  increase 
of  the  land  is  likely  to  offset  the  decrease  of  the  building  value  is  an 
item  which  the  loaner  takes  into  account.  Naturally,  a  higher  rate  must 
be  charged  for  the  money  loaned  where  the  perishable  building  is  the 
only  security.  This  will  make  it  more  difficult  to  obtain  a  loan  for  a 
man  who  wants  to  build  a  home,  and  will  make  the  rents  of  the  build- 
ing higher. 

PRACTICAL  DIFFICULTIES. 

Let  me  call  attention  to  the  practical  difficulty  of  levying  the  single 
tax.    To  quote  again  from  "The  Condition  of  Labor": 

"The  value  we  propose  to  tax,  the  value  of  land,  irrespective  of  im- 
provements, does  not  come  from  any  exertion  of  labor  or  investment  of 
capital  on  it  or  in  it ;  the  value  produced  in  this  way  being  values  of  im- 
provement which  we  would  exempt." 

If  the  capital  invested  in  a  piece  of  land  is  to  be  exempted  from  tax- 
ation, we  shall  find  that  many  lots  which  now  are  not  worth  the  capi- 
tal invested  in  them,  plus  interest,  will  have  no  tax  levied  upon  them. 
This  will  create  a  heavier  burden  for  other  lots  to  bear.  Suppose  we 
exempt  the  natural  value  of  land,  and  tax  the  so-called  "social  value"? 
How  can  we  determine  what  part  of  the  present  value  to  tax?  If.  on 
the  other  hand,  we  exempt  the  capital  invested  and  interest,  we  find 
often  that  the  sum  invested  will  be  far  greater  than  the  present  value. 
Every  lot  would  have  a  different  amount  of  exemption  from  its  neigh- 
bor, according  to  the  capital  invested  in  it  for  its  development. 

History  tells  us  that  Peter  Minuit,  the  first  director-general  of  the 
Dutch  East  India  Company,  paid  to  the  Indians,  in  1626,  the  sum  of 
60  guilders  or  about  $24  for  the  land  on  Manhattan  Island.  In  1913, 
the  assessed  value  of  this  land  was  $3,155,389,410,  but  when  we  figure 
that  this  same  $24  if  put  out  at  the  prevailing  rates  of  interest  since  1626, 
would  amount  to  $12,884,901,824  in  round  numbers,  we  conclude  that 
the  unearned  increment  or  "social  value"  was  not  so  much  after  all. 

CAPITAL  JOINED  WITH  THE  LABOR. 

In  a  settled  community,  where  capital  has  been  invested  in  land, 
it  is  practically  impossible  to  find  out  what  part  of  the  land  represents 
capital  or  labor  and  what  part  unearned  increment,  so  called.  By  un- 
earned increment  is  meant  the  increase  in  value  by  reason  of  the  in- 
creased demands  of  a  growing  population,  for  which  the  owner  does 
not  pay.  When  was  there  a  time  when  both  capital  and  labor  were  not 
spent  on  it?  In  a  new  community  when  everyone  starts  off  on  an  even 
basis,  and  it  is  agreed  that  land  shall  have  no  selling  value  at  all,  the 
single  tax  may  be  as  good  as  any  other,  but  not  so  where  all  the  land 
values  in  the  community  are  based  on  investments  from  the  proceeds 

203 


til 


p 


If 


of  labor.  In  fact,  in  such  cases  as  the  New  England  farms  before  men- 
tioned, their  entire  value  is  the  result  of  labor.  In  the  case  of  unim- 
proved city  lots,  although  the  original  capital  invested  was  small,  the 
taxes,  interest,  and  investment,  assessments,  and  interest  on  them,  some- 
times exceeded  by  a  large  sum  the  present  value  of  the  lots.  Only  a  short 
time  ago  an  article  in  the  newspaper  called  attention  to  a  lot  in  Tre- 
mont  Avenue,  The  Bronx,  which  the  owner  bought,  in  1872,  for  $5,000. 
In  1912  it  was  sold,  and  now  it  is  worth  $30,000.  At  the  time  of  the 
sale,  the  unpaid  taxes  and  assessments  amounted  to  $14,000.  What  other 
sums  he  paid  for  taxes,  assessments  and  repairs  is  unknown,  but  let  us 
consider,  for  the  sake  of  argument,  only  $14,000.  On  the  face  of  it,  the 
owner  made  a  large  profit,  but  upon  analysis  it  appeared  that  his  orig- 
inal investment  of  $5,000,  with  interest  for  the  40  years,  amounted  to 
$35,000.  He  paid  out  taxes  and  assessments  of  $14,000.  His  investment 
amounted  to  $49,200,  while  his  property  was  worth  only  $30,000.  What 
part  of  this  should  be  taxed?  Will  the  city  repay  to  him  the  sum  he 
has  spent  for  investments,  taxes,  assessments,  and  interest  over  the 
selling  value  of  the  property? 

It  may  be  seen,  therefore,  that  land  in  the  city  is  not  a  natural 
product  but  a  product  of  labor.  In  this  it  differs  in  no  respect  from  mer- 
chandise in  whose  exclusive  ownership  the  investor  is  entitled  to  all  the 
protection  of  the  laws,  and  that  a  tax  designed  to  take  away  the  selling 
value  of  his  property  is  only  a  confiscation  under  the  form  of  the  law. 

UNEARNED   INCREMENT. 

Much  is  said  of  the  unearned  increment  of  land,  caused  by  the  in- 
creased demand  for  it,  due  to  increase  in  population.  The  hope  of  this 
increase  is  what  induces  persons  to  invest  the  proceeds  of  their  labor 
in  the  development  of  vacant  property,  long  before  it  is  needed  for 
building.  After  such  investment,  if  the  population  moves  away,  does 
the  community  pay  the  owner  for  the  loss?  Assuredly  not.  Why  should 
it  have  the  increase?  The  increased  tax  on  increased  values  pays  to 
the  community  a  share  of  the  increase. 

SHRINKAGE  OF  OUR  CITY  BONDS. 

I  need  not  go  far  into  the  question  of  the  effect  which  the  shrink- 
age of  land  values,  due  to  the  single  tax,  would  have  on  New  York  City 
securities,  sold  to  people  all  over  the  world.  A  community  which  would 
confiscate  the  property  of  its  own  citizens  would  not  be  very  consid- 
erate of  the  owners  of  its  securities.  The  assessed  value  of  the  land  in 
New  York  City  is  $5,000,000,000.  By  law  our  bonds  may  not  exceed 
10%  of  their  assessed  valuation.  The  assessed  valuation  must  conform 
to  the  selling  value.  If  we  take  away  the  selling  value  of  $5,000,000,000 
worth  of  land,  out  of  the  total  of  $8,000,000,000  of  land  and  buildings, 
a  shrinkage  in  the  value  of  our  present  outstanding  securities  must  result, 
and  we  have  no  security  for  future  issues  to  carry  on  the  needs  of  the 
government. 

MORTGAGES. 

Millions  of  dollars  of  the  savings  of  our  people  are  deposited  in  sav- 
ings banks  and  invested  in  mortgages.  What  will  become  of  them, 
if  the  value  of  the  land  on  which  they  are  based  is  taken  away?    Five- 

204 


eighths  of  their  security  will  have  vanisiied.  The  same  result  will  be 
experienced  by  all  mortgages.  Can  it  be  supposed  that  such  wholesale 
disaster  will  be  of  benefit  to  the  laboring  classes  or  any  other  class? 
It  is  a  well  known  principle  that  no  law  which  is  unjust  to  one  class 
is  of  any  lasting  benefit  to  any  other  class. 

Let  us  take  two  instances,  to  see  how  the  proposed  plan  would 
work.  A  lot  is  worth  $10,000,  the  house  on  it  $20,000.  At  2%,  the  tax 
on  the  lot  would  be  $200,  and  on  the  house,  $400,  or  $600  in  all.  If  the 
tax  were  taken  off  the  building  and  the  land  taxed  for  the  rental  value, 
of  5%  (the  Henry  George  plan),  the  tax  would  be  $500,  a  difference 
of  $100.  Here  is  an  apparent  saving  but  what  is  the  truth?  In  the 
first  place,  the  owners  would  lose  $10,000,  the  selling  value  of  the  lot. 
and  in  the  next  place,  when  the  building  was  worn  out  he  would  havt 
nothing  but  the  right  to  build  again  on  the  lot.  Next  case,  a  lot  worth 
$1,000,  and  a  house  worth  $4,000.  Take  2%  tax  on  lot,  $20,  tax  on  house, 
$80,  or  $100  in  all.  If  the  house  is  exempted  and  lot  taxed  5%, 
the  tax  will  be  $50.  Again,  an  apparent  saving  of  $50  a  year,  but  the 
$1,000  selling  value  of  the  lot  will  have  gone,  which  he  might  receive 
in  20  years  at  $50  a  year ;  but  in  the  meantime,  his  house  will  have  worn 
out  or  become  out  of  date,  and  he  will  have  nothing  except  the  right 
to  build  again.     Who  is  to  gain  by  all  this? 

(Signed)     CYRUS  C.  MILLER,  Chairman, 
Advisory  Council  of  Real  Estate  Interests. 


ft 
1 


t 


205 


MEMORANDUM  SUBMITTED  BY  THE  REAL  ESTATE  BOARD 

OF  NEW  YORK,  OCTOBER  19,  1914,  ON  UNTAXING 

IMPROVEMENTS   ON   LAND. 

To  the  Mayor's  Committee  on  Taxation, 
Gentlemen : 

The  Real  Estate  Board  of  the  City  of  New  York  begs  to  present  its 
views  on  the  question  of  the  untaxing  of  buildings. 

The  partial  or  total  removal  of  taxes  on  improvements  on  land, 
would  logically  lead  to  the  removal  of  all  taxes,  except  those  on  land, 
for  what  good  reason  could  be  given  to  tax  any  other  form  of  property 
if  taxes  on  improvements  be  removed.  The  proposal  is  based  on  the 
theory  that  all  taxes  should  be  put  on  land  alone,  that  is  the  single  tax, 
as  advocated  by  Henry  George.  This  is  directly  opposed  to  our  pres- 
ent system  of  taxation  and  to  our  law,  which  regards  all  improvements 
on  lands  as  real  property.  It  would  lead  ultimately  to  the  absorption 
by  taxation  of  all  income  derived  from  land  and  the  abolition  of  private 
ownership  of  land. 

Henry  George's  opinion  of  the  eflFect  of  placing  all  taxes  on  land  is 
shown  by  the  following  quotation  from  his  "Progress  and  Poverty": 

"I  do  not  propose  either  to  purchase  or  to  confiscate  property 
in  land.  The  first  would  be  unjust;  the  second,  needless.  Let  the 
individuals  who  now  hold  it  still  retain,  if  they  want  to,  possession 
of  what  they  are  pleased  to  call  their  land.  Let  them  continue  to 
call  it  their  land.  Let  them  buy  and  sell,  and  bequeath  and  devise 
it.  We  may  safely  leave  them  the  shell,  if  we  take  the  kernel.  It 
is  not  necessary  to  confiscate  land ;  it  is  only  necessary  to  confiscate 
rent. 

"We  may  put  the  proposition  into  practical  form  by  proposing 
to  abolish  all  taxation  save  that  upon  land  values.  That  is  the 
first  step,  upon  which  the  practical  struggle  must  be  made.  When 
the  hare  is  once  caught  and  killed,  cooking  him  will  follow  as  a 
matter  of  course.  When  the  common  right  to  land  is  so  far  ap- 
preciated that  all  taxes  are  abolished  save  those  which  fall  upon 
rent,  there  is  no  danger  of  much  more  than  is  necessary  to  induce 
them  to  collect  the  public  revenues  being  left  to  the  individual  land 
owners." 

Thus  the  judgment  of  the  chief  advocate  of  the  single  tax  is  that 
the  adoption  of  the  principle  of  the  removal  of  taxation  from  improve- 
ments would  result  in  the  abolition  of  private  ownership  of  land. 

The  theory  of  the  single  tax  has  not  been  accepted  by  most  students 
of  political  economy,  see  Prof.  Johnson's  article  in  the  Atlantic  Monthly 
for  March,  1914,  which  also  presents  a  statement  of  the  advantages  of 
private  ownership  of  land. 

That  the  untaxing  of  improvements  has  not  diminished  congestion, 
increased  building  permanently,  nor  lowered  rents,  in  Australasia  was 
shown  in  Prof.  Seligman's  article  in  the  Political  Science  Quarterly  for 
March,  1913. 

206 


The  trial  of  the  exemption  of  improvements  from  taxation  in  Van- 
couver showed  that,  while  the  rate  of  building  was  at  first  stimulated,  it 
later  fell  below  that  existing  before  the  change. 

The  Real  Estate  Board  opposes  the  untaxing  of  improvements  be- 
cause : 

First.  It  would  be  unjust  to  the  owners  of  land  as  it  would  take 
value  from  them  without  compensation. 

Second.  Its  partial  adoption  would  completely  disarrange  and 
greatly  diminish  the  revenue  of  the  city. 

Third.  Where  it  has  been  tried,  notably  in  Vancouver,  it  has  in- 
creased congestion. 

Fourth.  It  will  not  cause  a  steady  increase  in  building;  if  it  should 
do  so  at  first,  there  will  be  a  great  falling  off  after  a  year  or  two,  for  the 
amount  of  building  is  governed,  like  the  satisfaction  of  any  human  need, 
by  the  law  of  supply  and  demand. 

Respectfully  submitted, 

THE  REAL  ESTATE  BOARD  OF  NEW  YORK, 

Per  DAVID  A.  CLARKSON, 

Chairman  Sub-Committee,  Committee  on  Taxation 
and  Legislation. 


207 


''il 


w 


BRIEF   SUBMITTED    BY   STEWART    BROWNE,    PRESIDENT 
UNITED  REAL  ESTATE  OWNERS  ASSOCIATION,  ON  EX- 
EMPTING BUILDINGS  FROM  MUNICIPAL  TAXATION. 

I  see  no  objection,  per  se,  to  exempting  all  buildings  from  taxa- 
tion; I  equally  see  no  objection,  per  se,  to  exempting  all  land  from  taxa- 
tion ;  if  either  had  been  in  force  for  the  past  loo  years  New  York  City 
would  be  exactly  as  it  is  to-day;  there  would  be  no  more  and  no  fewer 
buildings  because  of  the  one  or  the  other ;  "gradual  tax  evolution"  (ir- 
respective of  tax)  injures  no  one,  because  it  disappears  in  the  "price 
level,"  but  "tax  revolution"  is  chaos,  because  it  destroys.  History  shows 
that  all  old  taxes  are  good  taxes,  and  all  new  taxes  bad  taxes. 

In  considering  this  subject  let  me  state  a  few  economic  truths 
which  should  be,  but  are  not  generally  understood,  and  all  of  which 
have  a  bearing  on  the  above  question. 

The  only  real  value  known  to  finance  and  commerce  is  "exchange 
value";  cost  of  production  is  only  "cost  value";  such  does  not  enter 
into  "exchange  value" ;  the  "cost  value"  of  a  thing  may  be  little,  but  it* 
"exchange  value"  great,  and  vice  versa. 

"Exchange  value"  does  not  emerge  or  come  into  being  until  the 
moment  of  exchange;  before  and  after  exchange  the  value  is  only  po 
tential. 

The  "price  level"  of  a  town,  city  or  country  is  based  upon  the 
average  annual  income  (expressed  in  money)  of  labor;  where  annual 
income  expressed  in  money  is  low,  the  "price  level"  will  be  low;  where 
annual  income  expressed  in  money  is  high,  the  "price  level"  will  be 
high ;  one  is  not  exchanging  his  share  of  the  products  of  his  labor  for 
money,  but  for  a  share  of  the  products  of  others'  labor;  money  wages 
are  only  the  assumed  par  of  exchange  value  placed  on  one's  share  of  the 
product  of  one's  labor  expressed  in  the  money  denominator,  to  be  sub- 
sequently exchanged  for  the  share  of  the  product  of  others'  labor. 

All  wealth  is  stored  or  saved  labor;  taxes  of  all  kinds  always  have 
and  always  must  be  paid  by  labor;  to  say  you  tax  reahy  and  tax  per- 
sonalty is  as  untrue  as  to  say  realty  and  personalty  pay  taxes;  it  is 
the  owner  that  is  taxed  based  on  their  assumed  or  assessed  value,  just 
as  man  is  taxed  on  his  income;  the  fact  that  the  municipality  or  state 
may  have  a  tax  lien  on  realty  does  not  change  the  nature  of  the  act ;  the 
owner  of  realty  or  personalty  pays  his  taxes  out  of  the  j)roduct  of  his 
saved  or  daily  labor  and  he  often  is  compelled  to  pay  such  tax  when  the 
net  income  of  his  realty  or  personalty  falls  short  of  the  tax;  it  is  this 
misuse  of  words  that  is  responsible  for  the  belief  that  it  is  all  wrong 
to  tax  the  product  of  labor,  and  that  labor  and  the  product  of  labor 
should  be  "untaxed";  it  is  impossible  to  pay  one  dollar  in  taxes  except 
from  the  product  of  labor. 

All  taxes,  irrespective  of  their  kind,  are  shifted  on  the  entire  com- 
munity, just  as  wages  are;  new  taxes  or  a  sudden  large  increase  in  old 
taxes  are  not  automatically  shifted ;  it  requires  a  number  of  years ;  but 
when  shifted  they  finally  disappear  in  the  general  "price  level" ;  man 

1^08 


and  nations  adapt  themselves  and  their  business  affairs  to  their  ever- 
changing  environment,  taxed  and  otherwise;  cities  and  nations  grow 
and  flourish  not  because  of  taxation  but  in  spite  of  taxation;  the  high- 
est taxed  cities  generally  flourish,  while  the  lowest  taxed  generally  re- 
main stagnant  or  decay,  but  neither  effect  is  produced  by  reason  of  tax- 
ation. 

Exemption  from  taxation  has  never  in  the  history  of  the  world 
been  adopted  by  flourishing  communities;  but  always  by  "one  horse," 
new  and  relatively  small  municipalities,  which  have  offered  to  pro- 
posed new  industries  cash  bonuses,  loans,  free  land  sites  and  freedom 
from  all  taxation  for  from  lo  to  20  years ;  proposed  industries  have  put 
themselves  up  to  the  highest  municipal  bidder;  in  some  cases  such 
bonuses,  etc.,  etc.,  have  been  municipally  beneficial  but  in  others  dis- 
astrous ;  municipal  cash  bonuses  and  freedom  from  taxation  have  reached 
such  an  insane  craze  in  the  Canadian  Northwest  that  the  Provincial 
Governments  in  1914  legislated  against  such  in  future. 

Up  to  a  few  years  ago  no  municipality  (even  picayune  ones)  ever 
conceived  of  offering  perpetual  tax  exemption  on  all  new  buildings, 
residences  included,  as  an  inducement  to  build ;  if  such  be  economically 
sound,  land  tax  exemption  for  10  to  20  years  as  an  additional  induce- 
ment to  build  is  equally  so. 

EFFECT  ON  MANUFACTURING  INDUSTRIES. 

The  City  of  New  York  is  to-day  the  greatest  manufacturing  city 
in  the  world  and  has  become  so  without  "building  tax  exemption" ;  fac- 
tories are  located  where  there  are  superior  shipping  facilities,  superior 
labor  markets,  and  a  hundred  and  one  elements  that  appeal  differently 
to  each  factory  owner ;  to  have  exempted  factory  buildings  from  taxation 
during  the  past  ten  years  would  not  have  built  a  single  factory  that 
New  York  has  not  now ;  to  exempt  factory  buildings  from  taxation  in 
the  future  would  not  add  a  single  new  factory  building  to  New  York. 
If  a  bank  found  that  it  could  get  all  of  its  deposits  free  from  interest 
it  would  be  foolish  to  offer  interest;  so  likewise  when  New  York  has 
found,  and  still  finds,  that  it  has  all  the  factories  it  now  has  without  tax 
exemption  it  would  be  foolish  to  offer  such.  A  certain  section  of  the 
community  think  that  New  York  has  too  many  factories ;  that  it  could 
conveniently,  and  to  its  benefit,  reduce  their  number.  The  city,  by  the 
existing  building  and  occupancy  restrictions,  and  the  state,  by  its  ex- 
cessive labor  compensation  laws,  as  compared  with  other  states,  unless 
modified,  will  drive  many  existing  factories  away  and  will  prevent  the 
establishment  of  new  ones. 

EFFECT  ON  UNDER-IMPROVED  PROPERTY. 

There  can  be  no  doubt  that  if  an  owner  thought  the  existing  tax 
on  land  would  not  be  increased  and  that  a  new  building  would  be  "tax 
exempt"  he  would  seriously  consider  the  question  of  improving,  and 
he  might  take  greater  chances  against  possible  "future  tenancy"  than 
he  would  take  to-day ;  but  that  improvement,  if  undertaken,  would  mean 
"increased  height";  on  the  other  hand,  exemption  from  building  taxa- 
tion on  his  present  building  might  so  increase  his  net  income,  as  to 
deter  him  from  improvement;  what  the  net  aggregate  results  of  re- 
building might  be,  'tis  impossible  to  say.  If  "underimproved  buildings" 
were  taxed  and  new  buildings  tax  exempt,  the  net  aggregate  result-^ 

209 


i 

I 


lii^ 


■'  w< 


■il 


li 


^\ 


would  be  very  different.  Is  underimprovement  or  overimprovement  the 
better  for  New  York  City?  We  spend  large  sums  for  parks  as  open 
spaces;  does  not  underimproved  property  retain  the  "breathing  spaces" 
and  overimprovement  kill  them?  What  guarantee,  however,  is  there 
that  the  net  results  of  building  tax  exemption  would  not  increase  the 
land  tax  on  underimproved"  property  to  such  an  extent  as  to  equal  if 
not  exceed,  the  existing  gross  tax?  My  view  is  that  the  advantages 
and  the  disadvantages  would  be  about  equal,  and  that  the  only  thing 
that  would  force  building  erection  is,  as  now,  the  belief  in  "demand" 
or  increased  concentration  of  population. 

EFFECT  ON  FULLY  IMPROVED  PROPERTY. 

The  only  effect  would  be  to  put  a  penalty  on  buildings  having  a 
much  less  value  than  the  land  and  put  a  premium  on  buildings  having  a 
much  greater  value  than  the  land ;  the  City  would  be  deliberately  in- 
juring the  former  and  benefiting  the  latter;  the  former  would  have  a 
right  of  action  against  the  City  for  damages,  and  I  would  not  hesitate 
to  bring  injunction  proceedings  against  the  City  to  prevent  it  puttine 
such  a  tax  law  into  effect. 

EFFECT  ON  VACANT  LOTS. 

These  are  principally  in  the  outlying  sections;  ninety  per  cent, 
of  them  are  held  for  future  increase  in  value;  the  owners  are  willing  to 
sustain  present  losses  for  future  profits  in  the  hope  that  the  latter  will 
largely  exceed  the  former.  Just  as  soon  as  owners  believe  that  the 
future  -ams  will  be  less  than  present  losses  they'll  sell;  if  they  could 
sell  and  pocket  their  losses;  double  their  taxes  and  they  would  try  and 
sell,  but  the  buyers  would  be  few  and  far  between,  as  the  future  possi- 
bilities would  be  too  uncertain;  where  sold,  prices  would  be  from  25  per 
"u"i:4*°u^^u^^^»^^"*'  °^  ^^isting  values,  and  if  not  sold,  the  City  would 
hold  the  bag. '  In  this  connection  it  must  be  remembered  that  vacant 
lots  are  at  present  assessed  at  future  potential  values,  which  possibly 
may  be  reached  in  between  five  and  ten  years  from  now. 

As  for  forcing  improvement;  I  doubt  if  it  would  force  any  improve- 
ments; It  might  "cheap  shacks";  improvements  are  forced  by  demand 
for  occupancy  or  belief  in  demand ;  increasing  land  taxes  doesn't  increase 
that  demand  or  that  belief. 

EFFECT  ON  EXISTING  MORTGAGES. 

When  the  Federal  and  State  agitation  against  railroads  became 
acute  some  few  years  ago,  three  of  the  largest  financial  corporations  in 
the  United  States  stopped  buying  their  securities,  and,  instead,  decided 
to  lend  principally  on  mortgages  throughout  the  United  States  and 
started  large  mortgage  departments  for  such  purpose;  some  four  years 
ago  these  companies,  and  since  then,  nearly  all  New  York  City  cor- 
porate mortgage  lenders,  in  view  of  the  Single  Tax  and  Building  Ex- 
empt Tax  agitation  and  the  increasing  municipal  taxes  on  realty,  decided 
to  either  call  or  reduce  all  mortgage  loans  as  they  matured  and  they  have 
been  doing  so  to-day,  and  they  are  perfectly  justified  in  so  doing;  I 
suppose  that  50  per  cent,  of  due  mortgages  are  carried  on  sufferance 
because  the  lenders  are  afraid  to  foreclose. 

210 


EFFECT  ON  NEW  MORTGAGES. 

It  is  extremely  difficult  to  get  new  mortgages  to-day  and  when  ob- 
tained, they  are  not  for  over  60  per  cent,  of  what  would  have  been  ob- 
tainable five  years  ago;  with  "building  tax  exempt"  in  force,  the  con- 
ditions would  be  far  worse;  how  much,  no  one  could  even  guess  at;  if 
lenders  actually  believe  that  such  would  become  law,  I  don't  believe  they 
would  lend  at  all  and  those  who  are  now  lending  are  generally  buy- 
ing guaranteed  mortgages  so  as  to  have  "a  buffer"  between  them  and 
harm. 

RENT  REDUCTION. 

The  advocates  of  "building  tax  exemption"  say  it  will  reduce  all 
rents;  there  are  only  five  ways  to  reduce  rent:  (i)  to  reduce  price 
of  labor  and  material  used  in  construction  of  buildings  (the  labor  unions 
will  oblige  in  the  first  and  builders  will  oblige  in  the  second)  ;  {2)  to  in- 
crease the  value  basis  of  mortgage  loans  from,  say,  two-thirds  to  ninety 
per  cent.,  or  to  reduce  the  interest  rates  to  3  per  cent,  (of  course,  mort- 
gage lenders  will  prefer  to  make  and  increase  loans  and  reduce  interest 
to  reduce  rents ;  this  has  not  been  their  past  or  present  habit ;  they  will, 
however,  do  so  to  prove  the  theories  of  Single  Taxers  and  Building 
Exempt  Taxers  correct)  ;  (3)  to  reduce  taxes;  (the  City  Administration 
will  do  so  to  oblige)  ;  (4)  to  build  in  excess  of  "the  demand"  (specula- 
tors and  investors  will  do  this  to  oblige) ;  (5)  to  reduce  "the  demand" 
(the  public  will  leave  New  York  City  to  oblige). 

PRESENT  REALTY  VALUES. 

Speaking  generally,  the  American  people  are  not  investors  but 
speculators;  this  applies  to  realty  as  well  as  to  corporate  securities;  in- 
come value  is  the  least  of  the  elements  that  enter  into  the  basis  of  our 
"exchange  value" ;  ability  to  borrow  is  90  per  cent,  of  the  elements  that 
constitute  "exchange  value" ;  on  the  Stock  Exchange  "no  borrowing" 
means  a  reduction  of  50  per  cent,  in  all  values ;  eliminate  all  borrowing 
on  realty  and  buying  and  selHng  is  reduced  90  per  cent,  in  volume ;  when 
realty  is  sold  under  mortgage  foreclosure,  it  seldom  brings  the  mort- 
gage debt  unless  the  purchaser  can  obtain  a  liberal  loan. 

Up  to  fifteen  years  ago  New  York  City  realty  values  were  stable; 
values  could  be  relied  upon ;  there  was  a  fairly  even  annual  increase  in 
the  older  sections,  and  the  new  sections  increased  in  value,  but  not  at 
the  "value  expense"  of  the  former. 

During  the  past  fifteen  years  there  has  been  a  tremendous  activity 
in  realty;  one-half  of  Manhattan  has  been  rebuilt,  and  The  Bronx, 
Kings  and  Queens  have  become  large  cities.  Certain  values  have 
doubled,  trebled  and  quadrupled  in  a  few  years,  while  other  values  have 
decreased.  Certain  values  have  doubled  in  three  or  four  years  in  certain 
sections  and  lost  one-half  of  their  increase  in  two  or  three  years ;  the 
high  and  low  fluctuations  of  realty  values  in  New  York  have  almost  been 
as  great  and  as  erratic,  although  not  as  frequent,  as  Stock  Exchange 
securities;  all  this  has  been  due  to  dreams  of  building  promoters, 
"trades,"  credit  for  material,  ability  to  borrow  freely  at  low  interest  rates, 
large  purchase  money  mortgages,  first,  seconds  and  even  thirds,  im- 
proved transit  on  elevated,  surface  and  subway  lines. 

We  have  also  had  increasing  wealth  of  the  population  and  conse- 
quent increased  extravagance  in  living;  change  of  habits  and  fashions; 

211 


L.    iy 


!1 


L 


keeping  up  with  Lizzie" ;  changing  racial  population  environment- 
change  even  overnight ;  potential  values  assumed  to  be  actual,  until  it 
was  found  ^hat  the  potential  was  a  dream;  corporate  lenders  making 
new  loans  which  killed  their  old  loans.  ^ 

The  result  of  all  the  above  has  been  that  to-day  the  aggregate  actual 
cash  value  of  New  York  realty,  taking  it  by  and  large,  isn^t  25  per  cent 

U..I  "^^^  ^.^^"^  y^^"*^  ^S:o;  that  values  will  go  back  and  beyond 
what  they  were  is  unquestioned ;  but  when-  depends  upon  the  leneth 
of  the  existing  war  and  whether  such  end  means  immigration  from  or 
emigration  to  Europe,  liberality  of  mortgage  loans,  future  rate  of  interest 
and  treedom  from  increased  taxation  and  unwise  municipal  regulations. 

SUPPLY  NOW  EXCEEDS  DEMAND. 

The  thinking  public  now  complains  about  the  multiplicity  of  retail 
stores ;  that  these  hordes  of  middlemen  increase  the  cost  of  everythine 
to  the  consumer;  all  this  is  true;  notwithstanding  this,  the  proposal  il 
seriously  made  to  exempt  retail  store  buildings  from  taxation  so  as  to 
mcrease  their  number ;  the  city  is  even  conducting  free  markets,  which 
means  reduction  in  the  number  of  existing  stores. 

We  have  had  too  many  department  stores;' a  number  have  closed 
up,  and  a  few  others  are  hanging  on  the  financial  "ragged  edge"  •  yet 
It  is  proposed  to  exempt  department  store  buildings  from  taxation  so 
as  to  increase  their  number. 

One-third  of  the  aggregate  space  in  loft  and  office  buildings  be- 
tween 59th  Street  and  the  Battery  is  now  vacant  and  yet  it  is  proposed 
to  exempt  loft  and  office  buildings  from  taxation  so  as  to  increase  their 
number. 

One-half  of  New  York's  hotels  are  making  no  money  and  many  are 
losing,  yet  it  is  proposed  to  exempt  hotel  buildings  from  taxation  so  as 
to  increase  their  number. 

The  newer  apartment  hotels  are  only  holding  their  own ;  some  are 
losing  money;  the  older  ones  are  losing  money;  private  dwellings  in 
Manhattan,  except  in  a  few  streets,  are  "down  and  out" ;  yet  it  is  pro- 
posed to  exempt  such  buildings  from  taxation  so  as  to  increase  their 
number. 

PRESENT  ASSESSED  VALUATIONS. 

Taking  the  entire  city,  the  assessed  valuation  of  New  York  Realty 
IS  25  per  cent,  m  excess  of  its  true  actual  cash  valuation  from  an  income 
producing  or  a  selling  standpoint. 

Under  the  Seth  Low  administration  in  1903,  the  city  changed  from 
an  assumed  two-thirds  valuation  to  an  assumed  100  per  cent,  valua- 
tion. When  this  change  took  place  it  was  stated  that  no  increase  in 
taxes  would  take  place;  that  the  only  object  of  the  change  was  to  in- 
crease the  city's  borrowing  capacity;  since  then,  taxes  on  the  same 
specific  properties  have  been  increased  every  year,  until  to-day  they  are 
from  50  to  100  per  cent,  higher,  with  an  average  of  25  per  cent  decrease 
in  rents. 

In  a  city  like  New  York,  with  its  ever  "now  you  see  it.  and  now  you 
don't"  changing  realty  values,  almost  overnight,  100  per  cent,  assessed 
valuation  is  a  crime;  one  gets  the  increase  but  seldom  the  decrease;  in 
fact,  the  increase  has  been  in  many  cases  imaginary  and  due  largelv 
to  the  new  theoretical  and  so-called  scientific  basis  of  assessed  valua- 
tion. 

212 


In  the  old  days  we  had  a  crude  but  "horse  sense"  basis  of  as- 
sessed valuation,  which  produced  many  inequalities  between  owners 
but  none  of  these  were  other  than  favorable  to  the  owner;  under  the  new 
theoretical  and  so-called  scientific  basis  of  assessed  valuation  we  have 
the  same  inequahties  between  owners  but  most  of  them  are  against  the 
owner. 

Our  land  assessed  valuations  are  based  upon  assumed  potentiali- 
ties of  value ;  we  don't  call  it  that,  however ;  we  call  it  the  unit  system ; 
It  IS  not  a  fact  that  two  adjoining  inside  lots  of  equal  width  and  depth 
have  the  same  value,  whether  on  a  residence,  a  retail,  a  wholesale,  or 
office  building  street ;  they  may  not  even  have  the  same  potentialities  of 
value ;  m  fact,  they  often  do  not ;  what  would  be  thought  of  necessarily 
assessing  two  loo-acre  farms  adjoining,  and  with  the  same  frontage  at 
the  same  value?  One  may  be  worth  only  25  per  cent,  of  the  other* 
yet  such  is  no  more  ridiculous  than  what  we  are  now  doing.  If  the  city 
had  a  maximum  building  height  limit  of  six  stories,  the  inconsistency  of 
potentialities  of  value  assessment  and  the  unit  rule  would  not  be  so 
glaring;  but  with  no  height  limitation,  no  more  unjust  basis  could  be 
conceived  of;  one  must  "skyscrape"  to  reach  these  value  potentialities 
and  if  all  or  a  majority  did,  which  they  don't  and  can't,  these  potentiali- 
ties would  be  proven,  as  they  actually  now  are,  an  iridescent  dream,  ex- 
cept for  the  tax  assessor  and  collector;  where  a  few  have  competingly 
"skyscraped,"  the  potentialities  of  value  of  all  have  been  reduced,  but 
the  assessed  valuations  have  not.  Another  injustice  of  the  present'  sys- 
tem is  the  unbusinesslike  method  provided  to  get  quick  relief  from  over- 
valuation;  its  theory  is  all  right,  but  its  practice  is  bad.  The  Tax  De- 
partment's new  so-called  scientific  basic  values  are  based  on  "skyscrap- 
ing"  congestion;  Brother  McAneny's  height  of  building  committee  is 
engaged  in  destroying  the  very  values  that  the  former  is  so  industriously 
creating  as  a  basis  for  increased  bond  issues ;  Brother  McAneny,  with 
his  height  of  building  committee,  is  also  doing  his  best  to  reduce  the 
values  that  produce  the  taxes  that  he  is  so  desirous  of  spending  on  his 
"fads  and  fancies."  ^  ^ 

To  place  separate  values  on  the  land  and  building  of  improved 
property  originated  as  the  entering  wedge  for  the  Single  Tax ;  Lawson 
Purdy  IS  responsible  for  this  and  he  is  a  Single  Taxer;  only  a  theorist 
or  a  man  vjrith  an  obsession  could  so  value  improved  property;  when 
urban  land  is  built  on,  the  values  are  merged  into  one;  they  have  ceased 
to  have  separate  values ;  the  basis  of  such  value  is  the  usage  or  income 
value.  Our  tax  department  will  take  a  50-foot  frontage  and  value  it  at 
$200,000  and  value  the  building  thereon  at  its  cost  of,  say,  $200,000,  and 
value  the  adjoining  50-foot  frontage  at  $200,000  and  value  the  building 
thereon  at  its  cost  of,  say,  $200,000 ;  each  pays  the  same  taxes,  but  one 
may  not  and  never  will  be  worth  75  per  cent,  of  the  other;  such  en- 
equalities  exist  in  every  part  of  the  city. 

EFFECT    ON    BUILDING    TAX    EXEMPTION    ELSEWHERE. 

Vancouver,  Edmonton  and  other  towns  in  Northwest  Canada,  and 
certain  picayune  towns  in  AustraHa  and  New  Zealand  are  held  up  as 
the  great  examples  of  what  building  tax  exemption  has  done. 

The  Australian  and  New  Zealand  Government  reports  are  the  very 
reverse  of  what  is  claimed;  up  to  1913,  Vancouver,  Edmonton  and  other 
Northwest  Canadian  towns  showed  wonderful  increase  in  population  and 

213 


l\ 


•T 


I! 


li 


in  new  building  erection  per  capita,  but  less  than  in  Seattle,  Los  An- 
geles and  other  cities,  even  including  New  York.  Since  1913  the  bot- 
tom has  dropped  out  of  Vancouver,  Edmonton  and  other  Northwestern 
towns.  If  building  tax  exemption  was  responsible  for  the  "boom,**  then 
it  must  be  held  responsible  for  the  "collapse";  the  truth  is  that  it  had 
no  more  to  do  with  either  than  the  phases  of  the  moon.  Winnipeg  in 
the  i88o's,  with  a  tax  on  buildings,  had  a  greater  boom  than  any  Can- 
adian Northwest  town  has  ever  had;  but  its  collapse  was  as  great  and 
more  sudden  than  its  boom. 

I  personally  have  known  the  Canadian  Northwest  from  the  days 
when  Winnipeg  was  Fort  Gary  and  there  wasn't  a  village  between  there 
and  Victoria,  B.  C. ;  I  have  been  all  through  these  boom  towns  and 
twice  have  seen  lots  increased  from  $1,000  to  $100,000  in  a  year,  when 
such  increase  in  values  was  only  represented  by  purchase  money  mort- 
gages. The  whole  Canadian  Northwest,  farm  land,  villages,  towns  and 
cities,  has  been  boomed  by  new  railroad  construction,  rushing  in  of  im- 
migrants with  money  from  the  States  and  Middle  Canada  to  populate 
the  farms,  villages  and  towns ;  municipalities  borrowing  unchecked  and 
beyond  their  means;  everybody  in  the  land  business,  buying  and  selling 
like  madmen ;  everybody  making  money  on  paper ;  then  a  collapse.  Net 
result — 50  per  cent,  good,  50  per  cent,  bad  ;  many  values  will  come  back 
in  from  ten  to  fifteen  years  from  now  and  many  values  will  never  come 
back. 

PEOPLE  BENEFITED. 

The  only  people  benefited  will  be  the  owners  of  the  Woolworth  and 
other  large  office  buildings  and  large  property  owners  where  the  build- 
ing value  is  twice  and  thrice  the  land  value ;  their  taxes  will  be  reduced 
at  the  expense  of  the  majority  of  the  small  property  owners. 

PEOPLE  INJURED. 

There  are  170,000  vacant  lots  in  the  Boroughs  outside  of  Manhat- 
tan ;  their  owners'  taxes  will  be  increased  and,  if  they  build  a  private 
house  on  each  of  these  lots,  nearly  every  owner  will  pay  higher  taxes 
than  he  will  under  the  present  law.  The  vacant  lot  owner,  to  pay  rela- 
tively less  taxes,  must  build  tenements  and  not  dwellings 

EFFECT  ON  CITY  BOND  ISSUE. 

For  bond  purposes  the  aggregate  19 14  assessed  valuation  of  New 
York  realty  is  $8,049,859,912,  of  which  $4,602,852,107  is  ordinary  land 
values,  $2,855,932,518  is  building  values,  $404,420,311  is  special  franchises, 
and  $186,654,976  is  property  not  segregated.  The  city  is,  by  the  State 
Constitution,  limited  to  an  outstanding  bond  issue  in  aggregate  not 
exceeding  ten  per  cent,  of  its  aggregate  assessed  valuation.  The  city  has 
now  $757,705,833  outstanding  bonds  or  within  $47,000,000  of  its  maxi- 
mum legal  limit,  and  it  is  questionable  if  such  $47,000,000  is  not  also 
exceeded.  Eliminate  the  building  values  of  $2,855,932,518  from  the 
aggregate  assessed  valuation  and  deduct  10  per  cent,  (a  very  low  per- 
centage) from  the  aggregate  land  value  of  $460,385,107  for  reduction  in 
value  due  to  doubling  the  tax  on  land ;  and  the  aggregate  assessed  valua- 
tion for  city  bond  purposes  would  be  $4,733,642,287;  10  per  cent,  bond 
limit  upon  the  latter  would  be  $473,364,228,  while  the  existing  bond  issue 
is  .^^'757,705,833. 

214 


EFFECT  ON  PUBLIC  IMPROVEMENTS. 

The  city  needs  tens  of  millions  more  for  necessary  public  improve- 
ments; where  is  the  money  to  come  from?  No  more  bonds  could  be 
issued  until  the  aggregate  assessed  valuation  of  the  land  exceeded  the 
existmg  bond  issue.  The  assessed  land  value  of  New  York  has  only 
increased  $1,235,000,000  in  the  last  nine  years  and  only  $39,000,000  in 
the  last  three  years;  assuming  an  increase  equal  to  the  first  period  it 
would  take  two  and  one-half  years  for  the  land  values  to  equal  the 
existmg  combined  land  and  building  values ;  but  no  such  like  increase  is 
possible ;  on  the  basis  of  the  last  three  years'  increase,  it  would  take  ten 
years  for  the  land  values  to  equal  the  existing  combined  land  and  build- 
ing values. 

LEGALITY  OF  ELIMINATING  BUILDINGS  FROM  ASSESSED 

VALUATION. 

While  no  one  could  prevent  the  Legislature  from  passing  a  build- 
mg  exempt  tax  statute,  the  courts  would,  I  believe,  declare  it  unconsti- 
tutional;  any  city  bondholder  could  get  an  injunction  against  the  city 
from  putting  such  law  into  eflFect  as  such  would  be  an  impairment  of  the 
contract  rights  between  the  city  and  its  bondholders.  An  injunction 
would  also  he  against  the  city  by  an  owner  of  property  where  the  land 
value  was,  say,  two  or  three  times  the  building  value,  because  of  the 
rent  competition  by  properties  where  the  building  value  was  two  or 
three  times  the  land  value,  the  net  income  of  the  first  would  be  reduced. 

CONCLUSION. 

Building  tax  exemption  in  New  York  City  would  be  ruinous  to 
everyone,  because  it  would  revolutionize  everything;  it  is  the  craziest 
of  all  crazy  propositions  that  are  now  running  amuck;  'tis  said  **fools 
rush  in  where  angels  fear  to  tread." 

NOTE. 

This  article  is  written  from  the  standpoint  of  100  per  cent  building 
tax  exemption ;  if  it  be  25  per  cent,  or  50  per  cent,  the  static  effects  would 
be  correspondingly  reduced,  but  the  psychological  eflPects  would  be  ex- 
actly the  same  100  per  cent. 

New  York  City,  October  25th,  1914. 


BRIEF    SUBMITTED    BY    STEWART    BROWNE,    PRESIDENT 
UNITED  REAL  ESTATE  OWNERS'  ASSOCIATION,  ON 

SHIFTING  A  TAX  ON  LAND. 

Probably  the  majority  of  political  economists  believe  that,  while 
a  general  realty  or  building  tax  can  be  shifted,  a  tax  on  land  cannot 
be  shifted.  This  view  has  been  swallowed,  '*holus  bolus,"  by  the  Single 
Taxers  and  Building  Exempt  Taxers  and  is  the  foundation  upon  which 
they  build  their  entire  structure. 

Practical  experience  has  shown  that  many  of  the  theories  of  political 
economists  are  wrong.  Their  theories  on  shifting  and  incidence  of 
taxation  might  all  be  put  in  a  hat,  one  picked  out  at  random,  and  it 

215 


'1 


f 


\' 


i<\ 


would  be  as  true  as  any  of  them.     Many  of  them  deal  with  words, 
theories  and  abstractions  and  not  with  the  happenings  of  every-day  life. 

WHAT  IS  THE  MEANING  OF  SHIFT  A  TAX? 

Does  it  mean  that  concurrently  with  the  imposition  of  a  new  or 
increased  tax  the  original  owner  of  the  commodity  taxed  can  increase 
the  selling  price  of  the  commodity  taxed  to  the  first  purchaser  in  amount 
equal  to  the  tax,  irrespective  of  outstanding  agreements,  the  size  of  tax, 
the  supply  and  demand  of  the  commodity  taxed  and  one  hundred  and 
one  other  factors?  It  cannot  mean  this,  because  such  shifting  could 
never  be  done.  It  can  only  mean  that  the  original  owner  can  raise  his 
price  to  the  first  purchaser,  provided,  and  as  and  when  the  supply  de- 
creases or  the  demand  increases,  and  there  is  no  term  contract  between 
the  parties  as  to  the  continuance  of  price.  Shifting  takes  different 
periods  of  time,  dependent  upon  the  nature  of  the  commodity,  whether 
usable  or  unusable,  consumable  or  non-consumable,  and  luxurious  or 
necessitous.  (The  word  "commodity"  used  above  includes  land,  build- 
ing, realty,  rent.) 

HOW  AND  WHEN  CAN  A  TAX  BE  SHIFTED-^ 

The  owner  of  the  commodity  taxed  can  shift  such  tax  wholly  or 
partially  only  when  and  to  the  extent  that  he  can  increase  to  the 
first  purchaser  the  price  of  the  commodity  taxed,  irrespective  of  how 
the  result  is  accomplished ;  this  is  a  question  of  fact  and  not  of  abstract 
theory.  This  applies  to  all  commodities,  including  land  under  separate 
ownership,  building  under  separate  ownership  or  land  and  building  under 
one  ownership. 

If  the  price,  rent  or  net  income  is  increased  the  tax  is  shifted  in 
amount  equal  to  such  increase;  if  it  is  not  so  increased  or  is  reduced, 
then  the  tax  is  not  shifted. 

If  there  be  a  law  or  a  term  agreement  between  the  original  taxed 
owner  and  the  first  purchaser,  that  during  the  term  of  such  agreement 
the  owner  pays  the  tax  or  any  increased  tax,  or  if  not,  and  the  price 
cannot  be  increased,  then  such  tax  cannot  be  shifted  until  the  expira- 
tion of  the  agreement  or  till  an  increase  in  price. 

If  there  be  a  law  or  a  term  agreement  between  said  parties,  that  in 
addition  to  an  agreed  upon  price,  the  first  purchaser  shall  pay  the  tax 
or  any  increase  thereof,  then  such  tax  is  shifted  for  the  full  remainder 
term  of  such  agreement. 

The  only  question  in  dispute  therefore  is  the  shiftability  of  tax  at 
the  expiration  of  the  old  agreement,  and  such  depends  entirely  upon  the 
terms  and  conditions  of  the  new  agreement ;  this  is  again  a  question  of 
fact  and  not  of  theory. 

WHAT  IS  THE  .MEANING  OF  INCIDENCE  OF  TAXATION? 

This  means  upon  what  person  or  persons  and  in  what  proportion, 
how  and  when  does  any  tax  finally  rest  after  it  has  been  once  shifted. 

I  liken  this  to  the  billions  of  drops  of  water  going  over  Niagara 
Falls  and  billions  of  drops  of  water  finally  entering  the  ocean.  Who 
can  identify  the  drops  going  over  the  Falls  with  the  drops  entering  the 
ocean?  What  drops  and  percentage  of  drops  evaporate  on  their  course 
to  the  ocean  and  where  and  when  do  they  evaporate?  What  drops  and 
percentage  of  drops  are  taken  up  by  the  sun  and  reach  mother  earth,  re- 

216 


spectively,  in  the  shape  of  rain,  hail  and  snow ;  where  and  when  in  this 
country,  in  Europe  or  in  Asia? 

The  logically  thinking  man  who  examines  the  subject  thoroughly 
will  answer  "goodness  knows,"— which  answer  is  condemned  by  some 
Political  Economists. 

I  claim  that  all  taxation,  direct  or  indirect.  Federal,  State  or  Munic- 
ipal in  all  countries  is  included  in  and  increases  the  "Price  Level"  of  a 
country.  The  "Price  Level"  is  like  the  ocean,  into  which  all  streams 
flow.  The  "Price  Level"  is  the  net  result  of  the  people  bartering  the 
products  of  their  individual  labor  with  one  another  through  the  medium 
of  exchange, — "Credit,"  expressed  in  the  money  denominator  or  symbol 
($ — £ — &c)  of  the  different  countries. 

WHAT  IS  THE  MEANING  OF  CAPITAL  VALUE? 

Capital  value,  except  exchange  value,  is  a  mental  concept  used 
for  convenience  m  bookkeeping;  such  as  cost  value,  book  value  market 
value,  usage  value,  intrinsic  value,  income  value,  par  value,  face  value 
potential  value.  The  only  value  known  to  commerce  is  exchange  value' 
the  price  that  any  commodity  is  bought  and  sold  for.  Exchange  value 
emerges  only  at  the  time  of  sale  and  then  it  disappears.  All  com- 
modities, however,  have  potentialities  of  exchange  value  The  law  can't 
make  value.  Desire  of  possession  only  gives  exchange  value  and  desire 
of  possession  can  only  be  for  use  or  income  purposes  and  with  invest- 
ments or  realty,  generally  for  income  purposes. 

CAPITAL  VALUE  GAIN  AND  LOSS. 

There  is  no  capital  value  gain  or  loss  on  securities  or  realty  until 
a  sale  actually  takes  place  and  the  gain  or  loss  actually  happens 

Ihe  income  from  securities  or  realty  may  decrease  or  cease  en- 
tirely for  a  time,  but  this  of  itself  does  not  mean  a  loss  of  capital  value 

Lxperience  shows  how  difficult  it  is  for  owners  of  securities  or 
realty  to  take  an  actual  loss  by  selling ;  the  lower  selling  values  eo  the 
more  they  hold  tight ;  even  when  they  could  make  money  by  seiline 
they  won  t.  Take  realty  in  1915.  Values  have  gone  down  temporarily, 
but  even  when  mortgage  loans  are  called  and  there  are  reduced  rents 
increased  interest  rates  and  taxes,  owners  beg,  borrow  and  steal  to  hold 
their  property  in  the  certain  hope  that  in  a  year  or  two  conditions  will 
change  for  the  better. 

PRICE  LEVEL  FOR  LAND  AND  IMPROVED  PROPERTY. 

Investigation  shows  that  in  all  countries  and  in  all  cities  thereof  the 
realty  price  level  on  the  whole  always  keeps  increasing.  As  a  country 
emerges  from  primitive  conditions  to  civilization  values  rise  higher  and 
nigher,— there  are,  of  course,  temporary  "dips,"  but  the  next  high  level 
is  always  higher  than  the  last.     New  York  City  realty  values  and  rents 

M  fu'^^  °^  ^^"  ^^^^^  ^^^^  "^^  ^^^^  ^^  ^^^^^^  than  they  have  ever  been 
iNothing  can  prevent  such.     All  history  proves  this  as  a  certainty. 

ECONOMISTS'   MENTAL   CAPITAL   VALUE   GAIN   AND   LOSS. 

Political  Economists  and  their  imitators,  whenever  a  realty  tax  is 
increased,  go  through  the  mental  arithmetical  gymnastics  of  capitalizing 
such   tax  and  saying  that  all  realty  has  sustained  such  capital  los^ 

217 


They  don't  even  wait  to  see  whether  the  tax  has  been  offset  by  other 
gains  or  savings  and  the  tax  so  shifted;  instanter  it  becomes  a  loss.  This 
is  rank  nonsense,  because  it  is  not  a  fact. 

Their  next  step  is  to  say  that  a  lower  capital  value  price  level  has 
been  created.  That  by  reason  of  this  the  increased  tax  can't  be  shifted, 
because  it  has  been  psychologically  wiped  off  by  the  reduced  capital 
value  and  the  assumed  new  owner  won't  consider  it  when  fixing  rent. 

Many  Political  Economists  make  the  error  of  supposing  that  cost 
fixes  prices;  it  doesn't;  prices  are  fixed  by  demand  and  supply;  cost 
being,  in  course  of  time,  a  restraining  element  on  supply ;  but  less  with 
urban  improved  realty,  than  with  other  commodities,  as  buildings  are  a 
necessity  and  nonconsumable. 

Let  me  assume  that  the  New  York  City  realty  tax  was  2  per  cent, 
for  191 5  and  will  be  2>^  per  cent,  for  1916  and  that  all  realty  is  sold  to 
new  owners  in  1916  at  an  aggregated  reduced  value  of  25  per  cent.;  the 
demand  for  rents  keeps  increasing.  Would  the  new  owners  accept  the 
old  rents  instead  of  the  new  increasing  rents  because  they  bought  the 
property  cheap?  Would  the  new  owners  not  try  to  get  as  much  in- 
creased rent  as  the  old  owners  would  have  done  if  they  hadn't  sold.' 
If  the  new  owners  can  get  the  rents  up  to  equal  or  to  exceed  the  in- 
creased taxes,  I  claim  the  increased  taxes  have  been  shifted  even 
although  all  the  old  owners  suffered  an  actual  loss  in  capital  value. 

We  are  dealing  with  realty  irrespective  of  the  inividual.  The  unit 
or  individual  doesn't  count  in  nature. 

This  is  a  plain  every-day  commercial  transaction, — it  isn't  a  theory, 
an  abstraction  or  a  Political  Economy  question  at  all. 

FACTORY  PRODUCTS. 

The  cost  of  raw  material,  wages,  taxes,  interest,  overhead  charges, 
plus  profit,  etc.,  are  all,  in  the  by  and  large,  paid  for  by  the  consumer. 
There  are,  of  course,  many  exceptions  where  for  many  reasons  the  con- 
sumer pays  less  than  cost  price.  Being  movable,  they  are  interchange- 
able in  the  markets  of  the  world.  There  is,  therefore,  a  world-wide  and 
continuous  conflict  between  supply  and  demand.  Supply  and  demand 
never  synchronize;  now  supply  is  ahead,  now  demand  is.  In  the  long 
run,  however,  the  cost  is  shifted  to  the  consumer. 

AGRICULTURAL  LAND  PRODUCTS. 

They  are  like  factory  products,  movable  to  and  fro  around  the 
world ;  and  the  same  world-wide  fight  between  supply  and  demand  takes 

olace 

URBAN    LAND  PRODUCTS. 

Are  rents  or  self-occupancy  the  equivalent  thereof?  Urban  rents 
are  not  movable  property.  The  product  can't  be  taken  to  the  people, 
but  the  people  must  be  taken  to  the  product;  the  fight  between  supply 
and  demand  is  not  world-wide;  it  is  not  even  between  cities  except  in 
a  few  isolated  cases;  the  competition  is  confined  to  within  the  city 
itself  and  for  the  great  majority  of  classes  of  buildings  to  a  number  of 
small  localized  districts  thereof.  The  rise  and  fall  of  rents  is  due  en- 
tirely to  the  supply  and  demand  within  each  district;  the  supply  being 
the  number  of  competing  buildings  of  each  class,  and  the  demand  the 
number  of  people  for  each  class  of  building,  plus  such  people's  income 
earning  power. 

218 


Given  a  normal  supply  and  a  normal  demand,  plus  population  and 
greater  earnmgs,-and  rents  can  be  increased.     Given  a  normal  supply 
and  an  mcreasmg  demand   plus  greater  population  and  greater  earnings 
and  rents  can  be  st.ll  further  mcreased.    Any  increase  in  taxes.  like  any 
mcrease  m  expenses  or  mterest,  can  be  shifted  to  the  tenant -not  be 
cause  of  such  increase  .n  taxes,  but  because  of  the  demand  for  rents 

no'taxes^  '"''''''•■       "^  '""'"''  '"  ''"*  ^''^''^  ^^^PP^"  ^^^"  ^^^e  the« 
Conversely,  if  the  supply  of  rents  exceeds  the  demand,  rents  will 
fall  and  an  mcrease  m  taxes,  etc.,  can't  be  shifted  to  the  tenant. 

BRITISH  HISTORICAL;  LAND  (PRIOR  TO  1911). 
National  Land  Tax.     Paid  by  the  landowner 

,.^  Y^'^Jfy  ^^*^-  \^"^^  ^f"^  ^"^  ^°^^^'"'l  fo--  300  years  between  one 
and  five  shillmgs  m  the  £  of  assessed  valuation. 

Assessed  Valuation     Varying  percentages  of  actual  value  •  assessed 
valuations  only  changed  in  long  periods  of  years  '  ^**^***'' 

ni.r  ^TnT'^.f "'!i*^°"",'^u^^*''  ^"r^^^^)-    In  England,  paid  by  the  occu- 
rpertn't.°£"tt^olte"  '"  '"  ""•  ''  ^''^ '^"^  ownerVnd%°C 
English  Agricultural  Land.     Nearly  all  leased  by  the  land  owner  to 
tenant    farmers    under    long   leases;    improvements    revert' n^   to    llnd 
owner;  no  agreement  for  tenant  paying  national  land  tax     ^ 
the  ihfH  l°Tr'^  >n  originally  making  these  leases  always  considered 
?fftJ         they  paid ;  therefore  the  land  tax  was  then  and  there  fwfted 
If  there  was  a  reduction  m  the  tax  during  the  term  of  the  lease  the  land 
lord  received  the  benefit;  if  there  was  an  increase,  he  pocketed  the  >"st 

If  the  land  tax  had  been  increased  before  the  termination  of  fh. 

nT'  '^M  '^'  '""f/^'*  '^'^  <^°"''l  "ot  be  shifted  untTts  expiration 
and   whether   it  could   or  could   not   be   shifted   then   denendprf   of  tT' 

renewal  rent  the  land  owner  could  obtain  from  a  tenant  tf  the  new 
rent  was  increased,  the  tax  was  shifted  to  the  extent  of  such  increas^ 

lot  shi^t'ed  The  Z'  '''  ""^  or  reduced,  then  the  increased  tax'^^s 
not  snilted,— the  net  income  would  be  reduced  but  the  caoital  value  nf 
the  land  had  not  changed  until  it  was  sold  ^ 

The  price  for  British  agricultural  products  was  steadilv  falUn., 
owing  to  competition  with  foreign  countries,  and  when  leasees  felMn' 
he  renewal  rents  were  reduced,  thereby  reducing  the  net  ncor^e  of  the 
lact  Sed~'°  '''*  "°  '""^^^^^  '^"'^  ''^  '--^  have  been  oTwas.  in 
Had,  however,  the  prices  for  British  agricultural  products  increased 
renewal  rents  would  have  been  increased!  and  any  increased  land  tax 
would  have  been  shifted  proportionately  to  the  rent  increase  Where 
these  lands  were  not  sold,  there  was  no  decrease  or  increase  in  caoital 
value.-but  where  and  when  sold,  a  decrease  or  increase  would  ?aki 

oMncrtTe!  '"^"'^  '"  '''  "P''^""'  ^^'"^  ^^  '""^  -*  InromTd'e'crlas: 

1=„H^°","*^u^"'^?°''°"^h  rates  (taxes)  were  paid  by  the  tenant  in  Eng- 
land and  about  60  per  cent,  thereof  in  Scotland ;  a  decrease  "n  the  nf t 

819 


income  of  the  farm  fell  on  the  tenant  until  the  expiration  of  the  lease; 
any  increase  in  the  tax  during  the  term  of  the  lease  fell  wholly  on  the 
tenant  in  England  and  60  per  cent,  in  Scotland.  At  the  expiration  of 
the  lease,  as  agricultural  product  prices  were  falling,  the  tenant's  taxes 
were  in  whole  or  part  shifted  back  to  the  land  owner  to  the  extent  of 
the  production  in  rent. 

Had,  however,  agricultural  product  prices  increased  instead  of  de- 
creased, then  such  increased  local  rates  (taxes)  would  have  been,  as 
before,  paid  by  the  tenant. 

English  Urban  Land,  (i)  A  few  freehold  properties — land  owner 
and  building  owner  being  one;  (2)  Chief  rents  in  England  and  feus  in 
Scotland;  perpetual  and  for  999  years;  (3)  Sub-feus  in  Scotland;  (4) 
Leaseholds  (building)  99  years  and  shorter  terms  with  reversion  of 
buildings  to  land  owner. 

All  of  the  above,  except  the  first,  contemplate  erection  of  certain 
classes  of  building  by  other  than  the  land  owner  for  a  stipulated  single 
payment  or  annual  rent. 

Next  come  (5)  Tenancies  for  years;  (6)  Life  tenancies — for  one  or 
more  lives ;  (7)  Yearly  tenancies ;  (8)  Tenancies  at  will.  Under  Nos.  5 
and  6,  buildings  reverted  to  land  owner,  who  also  had  right  of  prior 
re-entry  if  rent  not  paid  within  a  stipulated  number  of  days  or  months. 

The  urban  land  owner  paid  the  national  land  tax.  In  England  the 
urban  occupier  paid  the  Borough,  County  and  Municipal  rates  (taxes) 
and  in  Scotland  the  land  owner  paid  about  40  per  cent,  and  the  occupier 
about  60  per  cent,  of  such  municipal  rates  (taxes).  I  am  not  certain 
whether  in  Scotland  it  is  the  original  land  owner  under  the  Oown  or  the 
feu  owner  that  pays  the  40  per  cent,  municipal  tax.  I  know,  however, 
that  the  feu  owner  pays  a  municipal  property  tax. 

The  land  owner  under  the  (jrown,  granting  perpetual  Chief  rents 
(England)  or  Feus  (Scotland),  considered  the  land  tax  (whatever  it 
was)  at  the  fixing  of  the  original  chief  rent  or  feu  duty — if  the  land  tax 
was  subsequently  increased  he  could  not  have  shifted  the  increased  tax; 
if  the  land  tax  was  reduced,  the  land  owner  received  the  benefit ;  he  got 
no  benefit  from  increasing  urban  land  values — the  owner  of  chief  rent 
or  feu  or  perpetual  ground  rent  received  the  entire  benefit. 

The  British  land  owner,  granting  limited  term  ground  rents,  or  lim- 
ited term  leaseholds,  tenancies  for  years  or  for  life  of  urban  land,  has 
received  at  the  expiration  of  such  agreements,  enormous  increased  rents 
due  to  the  great  increase  in  British  urban  values.  Agricultural  lands 
have  been  turned  into  urban  lands.  So  that  any  increase  in  the  national 
land  tax  and  in  Scotland  in  the  land  owner's  percentage  of  the  municipal 
tax,  has  been  shifted  ten,  a  hundred,  a  thousand  times,  first  to  the  build- 
ing owner  and  from  him  down  the  entire  line  to  the  occupier  by  reason 
of  the  ever-increasing  rent. 

Limited  term  leaseholds  came  largely  into  being  from  1800  onwards 
— when  the  tremendous  increase  in  values  of  urban  land  commenced. 
Land  owners  saw  how  their  perpetual  grants  had  resulted — in  loss  of 
net  income  on  agricultural  land  and  loss  of  increment  vahies  in  urban 
land,  and  they  hedged  themselves  for  the  future  by  making  limited  term 
leases,  shorter  in  term  as  urban  increment  values  gre\v. 

As  the  English  occupier  by  law  paid  the  municipal  rates  (taxes) 
and  the  Scottish  occupier  paid  60  per  cent,  thereof,  and  as  the  urban 
occupier's  rent  is  continually  increasing  as  a  whole,  the  occupier  can't 
shift  his  increasing  municipal  rates  (taxes)  on  to  the  building  owner, 

220 


and  by  the  latter  on  to  the  land  owner,  as  is  the  case  with  agricultural 
land.  In  Scotland,  the  urban  feu  owner's  proportion  of  municipal  taxes 
can  be  shifted  to  the  building  owner  on  the  expiration  of  his  leasehold 
and  then  to  the  occupier  by  reason  of  the  ever-increasing  rents. 

ORIGIN  OF  THEORY  OF  NON-SHIFTABILITY  OF  LAND  TAX. 

When,  how  and  with  whom  did  the  above  theory  originate?  There 
was  probably  someone  before  Adam  Smith  and  his  contemporary  Polit- 
ical Economists;  Locke  in  1692  appears  to  have  had  the  same  theory. 
I  believe  it  first  originated  because  English  Chief  rents  and  Scottish 
Feus  (both  perpetual)  were  principally  in  vogue  in  their  time  and  prior 
thereto,— under  which  the  building  owner's  superior  landlord  under  the 
Crown  had  to  pay  the  entire  national  land  tax ;  under  these  circumstances 
the  land  tax  could  not  be  shifted  even  had  it  been  increased  tenfold. 
Another  reason  was  that  the  owner  of  agricultural  land,  owing  to  de- 
creased prices  for  agricultural  products  and  consequent  decreased  net 
rental,  was  unable  to  shift  the  land  tax  to  the  tenant ;  still  another  reason 
was  the  peculiar  tendency  of  Political  Economists  to  forthwith  mentally 
capitalize  any  increased  tax  and  reduce  all  land  values  in  amount  equal 
to  such  capitalized  tax  and  then  claim  that  the  tax  was  not  shifted,  as 
it  had  been  charged  oflF  to  or  deducted  from  capital  value  (see  remarks 
under  Actual  Capital  Gain  and  Loss  Values  and  Assumed  Capital  Loss 
Values). 

Succeeding  economists  followed  in  the  wake  of  the  earlier ;  treating 
with  abstract  theories  instead  of  actualities,  and  the  result  has  been 
the  fetich — a  land  tax  can't  be  shifted. 

Let  anyone  read  (as  I  have  done)  the  speeches,  the  parliamentary 
reports  of  the  leading  British  statesmen  from  1600  onwards  and  the 
divergent  views  of  leading  Political  Economists  on  every  kind  of  taxa- 
tion, its  shifting  and  incidence,  and  one's  faith  in  the  logical  deductions 
of  the  majority  of  Britain's  greatest  men  is  forever  shattered. 

NEW  YORK  CITY  REALTY. 

Ownership.  We  have  no  such  complex  conditions  here  as  exist  in 
Britain ;  our  realty  holding  and  taxing  are  very  simple. 

,  Our  Single  Taxers  love  to  mouth  the  phrases  "Ground  Rents." 
Economic  Rent"  and  other  euphonious  and  political  economy  phrases 
We  haven't  a  single  (British)  Ground  Rent  in  New  York  City,  yet 
the  term  appears  a  dozen  times  in  the  Mayor's  Taxation  Committee's 
Questionnaire,  when  Leasehold  Rents  are  meant.  "Ground  rent"  is 
even  used  as  an  assumed  rent  of  land,  when  there  is  no  rent  in  actual 
existence. 

We  have  a  few  leaseholds  for  limited  terms  of  years,  subject  to 
renewal  on  rent  appraisement  and  under  which  the  lessee  or  buildine 
owner  pays  the  realty  tax.  Will  any  Single  Taxer  have  the  foolhardi- 
ness  to  say  that  the  tax  assessed  on  such  leased  land  is  not  shifted  by 
the  land  owner  on  to  the  building  owner?  I  believe  they  have  I  be- 
lieve they  will  say  so,  because  if  they  don't,  their  entire  contention  (not 
argument,  because  they  have  none)  is  gone  to  smithereens. 

h  \A^u^  ^  ^^^  leasehold  exceptions  all  our  realty  is  owned  as  "free- 
nold     by  one  person— the  owner  owning  the  land  and  the  building 

221 


11: 


For  anyone  to  say  a  tax,  whether  the  tax  be  i  per  cent,  or  lo  per 
cent.,  on  New  York  City  land,  where  the  land  and  building  thereon  is 
owned  as  freehold  by  the  same  person,  can't  be  shifted,— is  simply  rank 
nonsense. 

If  the  feu  owners  and  sub-feu  owners  in  the  large  cities  of  Scotland 
can  shift  their  increased  municipal  taxes  on  to  their  building  owners  and 
the  latter  reshift  to  the  occupiers,  as  they  are  doing  continuously  at  the 
end  of  their  short  term  leases,  by  raising  their  rents  far  in  excess  of  their 
increased  taxes — what  is  to  prevent  the  New  York  City  realty  owner 
doing  likewise? 

If  the  New  York  owner  can  raise  his  rents  at  the  expiration  of  his 
leases,  he  shifts  any  tax  or  increased  tax  to  the  extent  that  he  can  raise 
his  rents.  If  he  can't  raise  his  rents  he  can't  shift  the  tax—that's  the 
answer  to  the  whole  question  at  issue. 

If  rents  could  be  raised  annually  prior  to  1907,  and  subsequently  in 
the  case  of  stores,  as  they  were,  what  is  to  prevent  a  further  increase  in 
all  rents  when  demand  equals  and  overtakes  supply  as  it  will  before 
long?  Will  the  Single  Tax  idea  of  the  Tax  Department,  dividing  the 
actual  payable  tax  into  a  mental  land  tax  and  into  a  mental  building  tax 
in  equal  or  unequal  proportions  or  calling  it  all  mentally  a  land  taxt 
prevent  rents  from  ever  rising  again? 

Will  these  Single  Taxers  tell  me  the  difference  between  the  Scottish 
feu  owner  (municipally  taxed),  the  building  owner  and  the  occupier; — 
the  New  York  City  land  owner-lessor,  the  building  owner-lessee  and  the 
tenant — the  New  York  City  land  owner  and  building  owner  (as  one 
person)  and  the  tenant.  If  it  is  possible,  as  it  is,  for  the  two  first  land 
owners  to  shift  increased  land  tax  to  the  tenant,  it  is  more  easily  possible 
for  the  latter,  because  the  land  owner  has  a  lease,  terminable  from  second 
to  second,  with  himself  as  the  building  owner.  If  such  building  owner 
can  increase  his  rents,  the  land  owners'  (Tax  Department)  assumed  land 
tax  has  been  shifted  as  and  when  and  to  the  exact  extent  that  the  building 
owner  has  been  able  to  increase  his  rents. 

PRICE  LEVEL. 

The  rise  and  fall  in  interest  rates  is  one  factor  of  the  price  level — 
also  credit, — new  inventions, — intensity  of  production  and  a  thousand 
and  one  other  factors.  If  a  realty  owner's  or  an  investor's  income  be 
reduced,  and  he  can  buy  as  much  or  more  with  the  reduced  income  than 
he  could  before,  he  is  not  hurt,  in  fact  he  may  be  benefited. 

Nominal  decreases  or  increases  in  income  or  capital  value  may  not 
be  actual;  the  actual  is  to  be  found  only  in  the  Price  Level. 

TAX  DEPARTMENT'S  ASSESSED  VALUATIONS. 

Urban  land  has  no  income  value  except  as  it  is  built  upon ;  it  is  the 
building  that  produces  the  income  and  gives  a  capital  value  to  the  whole ; 
the  actual  value  of  the  land  and  building  is  merged  in  one  and  in  fact  is 
one ;  before  being  built  on  the  land  had  potentialities  of  value ;  when 
built  upon  the  potential  becomes  actual. 

Vacant  lots  should  be  assessed  and  taxed  on  some  varying  bases  of 
potential  value.  There  are  many  cases  where  the  potential  value  is 
heavily  over-assessed-valued  and  many  other  cases  vice-versa.  Nothing 
is  more  diflFicult  to  treat  equitably. 

900 

(V  -v  V 


Prior  to  1904  the  Tax  Department  showed  assessed  values  of  land 
and  building  thereon  in  one  amount;  since  then  an  assumed  assessed 
land  and  building  value  separately  is  shown.  Single  Taxers  claim  that 
they  produced  this  change. 

Capital  value  of  producing  realty  should  be  based  upon  income 
value ;  for  taxation  purposes  a  reduction  from  such  income  value  should 
be  made  for  shrinkage  and  contingencies.  Fully  improved  realty's 
assessed  valuation  should  be  made  by  capitalizing  the  net  income.  I 
can  take  any  downtown  office  building,  wreck  it,  rebuild  it  with  the 
same  floor  area  at  less  cost,  less  running  expenses  and  produce  in- 
creased rates.  Is  the  value  in  the  land  or  building?  I  can  compare  two 
buildings  within  a  block  of  one  another ;  ground  area  the  same,  aggregate 
floor  space  the  same, — building  of  one  cost  about  one-third  more  than 
the  other — net  income  of  the  latter  one-third  more  than  the  former; 
what's  the  land  value?  What's  the  actual  land  value  of  No.  60 
Fifth  Avenue, — building  taken  down  to  save  taxes?  It  is  true  that  a 
building  could  not  be  built  but  for  the  land.  It  is  equally  true  that  urban 
land  has  no  value  but  for  the  building.  How  can  the  land  and  building 
thereon  of  fully-improved  realty  have  separate  distinct  actual  values? 
It  can't  be  sold,  mortgaged  or  foreclosed  separately.  Even  the  City 
won't  accept  the  land  and  building  tax  separately. 

For  statistical  purposes,  to  know  the  value  of  buildings  individually 
and  in  the  aggregate  is  a  necessary  thing,  but  it  ought  not  to  be  in  the 
tax  list  and  for  taxation  purposes. 

LAST  EXAMPLE. 

Prior  to  1903  assessed  valuations  were  shown  on  land  and  build- 
ing as  one;  since  then  they  have  been  subdivided  into  land  and  building. 
How  did  such  separation  change  the  tax  payable  as  a  whole?  The  land- 
lord had  to  pay  it,  irrespective  of  whether  it  was  called  a  tax  on  realty 
or  a  separate  tax  on  land  and  a  separate  tax  on  building.  If  such  a  tax 
on  land  couldn't  be  shifted,  why  was  it  possible  for  rents  to  be  increased 
subsequent  to  1903?  There  is  no  doubt  in  my  mind  that  rentals  in  a 
few  years  will  be  higher  than  ever  in  New  York.  How  can  the  realty 
tax,  by  calling  it  a  tax  on  land,  prevent  such  increase  in  rents?  If  it 
doesn't  prevent  such  increase,  why  then  is  the  tax  not  shifted? 

A  LAST  THOUGHT. 

It  may  be  that  the  divergent  views  on  the  shifting  of  taxes  is  due 
to  the  lack  of  consensus  of  agreement  as  to  the  meaning  of  the  term 
shiftmg  a  tax."  A  large  number  of  Political  Economists  and  prominent 
men  in  England  have  held  that  no  tax  on  any  subject  matter  taxed  can 
be  shifted — that  it  must  rest  where  first  placed.  Do  those  mean  that  a 
tax  can't  be  shifted  because  the  price  fixed  by  demand  and  supply  for 
any  commodity  is  fixed  irrespective  of  any  tax?  If  this  is  the  conten- 
tion, then  it  is  true.  Do  those  who  claim  that  a  tax  on  land  can't  be 
shifted,  while  admitting  it  can  on  all  other  subject  matters  taxed,  mean 
that  because  land  (except  in  exceptional  cases)  can't  be  increased  or 
decreased  in  square  foot  area  quantity,  such  facts  puts  land  in  a  different 
category  from  buildings  and  other  products  because  man  can  put  a 
physical  limitation  on  the  quantity  of  the  latter  that  can  be  produced? 
•li  this  is  the  basis  for  their  contention,  then  their  basis  is  wrong  because, 
while  their  contention  may  be  true  as  regards  agricultural  land,  it  is 

223 


wholly  untrue  as  regards  urban  land,  as  man  can  put  a  physical  limi- 
tation on  the  number  of  buildings  that  can  be  erected,  this  puts  a  like 
physical  limitation  on  the  quantity  of  land  that  is  used  for  buildmg 
purposes;  hence  urban  land  in  this  respect  must  be  regarded  in  the  same 
category  as  buildings  and  as  all  other  commodities. 

Conclusion. 

I  say  without  fear  of  logical  contradiction  that  if  factory  costs  can 
be  shifted,  if  a  combined  building  and  land  tax  can  be  shifted,  and  if  a 
building  tax  can  be  shifted,  a  tax  on  the  land  upon  which  buildings  are 
built  can  be  shifted  as  outlined  above. 

It  may  be  properly  asked  if  I  believe  that  a  land  tax  can  be  shifted ; 
why  do  I  oppose  it?  My  answers  are  that  the  belief  in  anything  is 
greater  than  the  reaUty ;  things  are  only  real  as  we  beUeve  them  to  be  so ; 
the  great  mass  of  people  feel  and  don't  think.  Nothing  is  so  timid  as 
capital.  Financial  institutions  get  as  easily  panic-stricken  as  do  Italian 
laborers.  Even  although  the  proposed  tax  was  distributed  over  twenty 
years,  its  evil  effects  would  be  greater  at  once,— because  disastrous— 
than  ten  years  from  now.  Further,  the  proposed  change  means  increased 
taxation  on  all  properties  and  it  would  take  ten  years  to  shift  such  a 
tax,  but  finally  it  would  be  shifted. 

December  7th,  1915. 


LETTER  OF  JAMES  W.  SULLIVAN, 

Designated  By  Samuel  Gompers,  President  of  the  American  Federation 
of   Labor,   to   Represent  the   American    Federation    of    Labor    in 
Connection  With  the  Hearings  of  the  Committee  on  Taxation 
On  the  Proposal  to  Differentiate  Between  the  Direct  Taxa- 
tion of  Land  and  of  Buildings  By  Reducing  in  Whole 
or  in  Part  the  Tax  Rate  on  Buildings  as  Com- 
pared With  That  On  Land. 


Samuel  Gompers, 
President. 


224 


Frank  Morrison, 
Secretary. 

AMERICAN  FEDERATION  OF  LABOR 

Main  Office 

801-809  G  St.,  N.  W. 

Washington,  D.  C. 

Hugh   Frayne,  General   Organizer, 

Bartholdi  Building 

Corner  Broadway  and  23d  St. 

Suite  710 

Telephone  Gramercy  3373 

New  York,  November  3,  1915. 
Mr.  Laurence  A.  Tanzer,  Executive  Secretary, 
City  of  New  York  Committee  on  Taxation, 

Room  914,  Municipal  Building,  New  York  City. 
Dear  Sir: 

nti.cf"  r^^^  -A  ^?"/  ^^"^'  ""{  October  27th,  and  in  response  to  the  re- 
}h!L'l  a'^^\^u^  Gompers,  I  herewith  give  you  information  regarding 
^e  attitude  of  the  American  Federation  of  Labor  to  taxation  as  brought 
out  at  its  conventions.  ^ 

fi,.  7^^/^^°^^s  of  the  proceedings  of  the  Federation  conventions  for 
the  decade  1905-1914  show  that  consideration  was  given  in  that  period  to 
three  resolutions  relating  to  taxation.  t^  ^^j 

Vi.uJ'J^^'  '"]  ^"lu"i^^'  *^i'  resolution  (No.  147)  was  introduced  by 
Delegate  Frank  P.  Shalvoy,  of  the  United  Hatters :  ^ 

Mr.  y^^l^,^'  The  question  of  equal  taxation  and  the  municipal  owner- 
ship of  public  utilities  having  become  a  factor  politically  in  some  of  our 
most  thriving  and  industrial  centers  it  is  fitting  and  proper  for  the 
representatives  of  organized  labor  under  the  banner  of  the  American 
our  !ffl'''!3  '  Labor  to  go  on  record  and  express  in  unmistakable  words 
our  attitude  in  the  solving  of  these  problems,  which  means  so  much  for 
civilization  if  they  are  solved  rightly ;  and, 

^  ""^^Fl^^'J^^^  ^^^  present  system  of  taxation  now  in  vogue  is  but 
a  copy  of  the  laws  governing  taxation  which  have  existed  under  evenr 
S".  i""  "i?"  ?^  government  in  ages  gone  by  and  which  were  insti- 
mad.  Af^'  ^^^-^t"^'  1^^^  many  being  subservient  to  every  form  of  law 
maae.    After  a  fair  trial  under  a  free  government  we  find  the  same  iden- 

225 


i 


tical  conditions  to  prevail — extreme  wealth  on  the  one  side  and  extreme 
poverty  on  the  other. 

"Resolved,  That  in  our  humble  opinion  such  a  system  of  taxation 
never  should  have  been  adopted  for  our  beloved  country  to  go  hand  in 
hand  with  that  immortal  Declaration  of  Independence. 

"We  favor  the  gradual  abolition  of  every  form  of  tax  upon  the 
products  of  labor. 

"We  hold  that  land  itself  never  had  a  value  until  the  people  created 
that  value  and  that  land  is  and  should  by  right  be  held  as  sacred  to  the 
people  as  the  air  we  breathe. 

"We  favor  the  enforcement  of  tax  laws  which  shall  eliminate  en- 
tirely the  products  of  labor  and  return  to  the  people  for  the  necessary 
expenses  of  our  government  that  value  that  the  whole  people  create. 

"We  hold  that  any  other  form  of  taxation  is  barbarous  and  unjust 
and  not  in  keeping  with  a  free  and  enlightened  people  The  wealth 
created  by  a  single  individual  by  every  law,  human  or  divine,  belongs 
to  the  whole  people." 

The  Committee  reported  as  follows  on  Resolution  No.  147: 

"In  the  opinion  of  this  committee  the  subject  matter  contained 
herein  is  not  in  proper  form  to  be  acted  upon  by  the  committee,  as  it  is 
a  declaration  of  principles  instead  of  a  set  of  resolutions.  We  recom- 
mend that  no  action  be  taken  thereon." 

On   motion  the  report  of  the  committee  was  adopted. 

In  1907,  at  Norfolk,  this  resolution  (No.  145)  was  introduced  by 
Delegate  George  Finger,  Brotherhood  of  Painters  and  Decorators: 

"Whereas,  Indirect  taxation  puts  the  burden  upon  the  workmen  of 
America,  who,  like  proletarians  of  other  ctjuntries,  have  large  families, 
and  therefore  are  taxed  entirely  out  of  proportion  whenever  they  buy  any 
necessities  of  Hfe;  first,  because  they  are  poor,  and  whenever  they  buy 
they  pay  as  much  tax  as  the  rich ;  second,  by  reason  of  usually  having 
large  families  they  multiply  the  indirect  taxes  they  pay.  and 

"Whereas,  It  ought  to  be  the  duty  of  wise  and  just  legislators  to 
put  the  burden  where  it  properly  belongs — upon  the  shoulders  of  those 
able  to  pay;  and 

"Whereas,  The  present  mode  of  taxation,  which  is  absolutely  pluto- 
cratic and  inhuman,  has  materially  aided  our  big  capitalists  in  accumu- 
lating huge  fortunes ;  therefore  be  it 

"Resolved,  That  the  twenty-seventh  annual  convention  of  the 
American  Federation  of  Labor  hereby  protests  against  a  system  of  taxa- 
tion which  is  entirely  in  favor  of  the  small  class  of  exploiters  and  against 
the  wage  class  of  producers.  We  demand  the  abolition  of  all  indirect 
taxes,  and  only  the  small  properties  of  the  producers  ought  to  be  exempt. 
We  declare  in  favor  of  an  income  tax  gradually  increasing  with  the  in- 
come and  are  also  in  favor  of  an  inheritance  tax  which  is  to  increase  in 
percentage  with  the  size  of  the  inheritance." 

The  Committee  on  Resolutions  amended  as  follows : 

"Resolved,  That  we  declare  in  favor  of  an  income  tax  gradually 
increasing  with  the  income  tax  and  we  are  also  in  favor  of  an  inheritance 
tax  which  is  to  increase  in  percentage  with  the  size  of  the  inheritance." 

The  report  of  the  committee  was  concurred  in. 

In  1912,  at  Rochester,  this  resolution  (No.  71),  introduced  by  Dele- 
gate Frank  H.  McCarthy,  of  the  Boston  Central  Labor  Union,  was,  on 
recommendation  of  the  Committee  on  Resolutions,  adopted : 

226 


"Resolved,  That  we  favor  the  imposition  of  a  small  tax  on  land 
values  in  place  of  some  of  the  more  burdensome  tariff  taxes'^ 

represltative  of  ^the' a'"'  ''"'  ^V^'  Committee  on  Taxation  to  the 
[n  connection wi^^^^  nlr  ^"'^"^  Federation  of  Labor  to  be  considered 
ing  t^waj^  ""^'^  ''  """''  ^'''''^^"  i8-Series  3,  rela^ 

^^^^What  is  the  connection  between  the  rents  and  wages  in  New  York 

Are  wages  higher  in  New  York  than  in  other  cities?    If  so  why? 

If  one  of  the  causes  of  higher  wages  in  New  York  City  is  hieher 
rents  would  a  decrease  m  rents  mean  a  fall  in  wages?    If  not   why  not ' 

The  members  of  organized  labor  hold  it  as  a  fact  that  the  level  of 
wages  depends  mainly  on  effective  trade  unionism.     The  w^^^^^    elk  of 
a  trade  union  is  uniform  whatever  the  variation  in  the  rL7s  paid  bv  its 
members.     A  union  which  controls  the  supply  of  the  llbor  of    ts  occu 
pation  fixes  the  scale  with  far  more  regard  to  the  profits  of  the  employers 
than  of  the  rental  of  habitations.      In  New  York  nearly  airorTanzabk 
occupations  are  organized  in  unions.     In  the  non-orgaLed    ™ 
directly  influenced   by  the  union   scale  of  nearly   rdated   ocSons 
Within  any  one  occupation  also,  the  union  scale  fixes,  in  a  generafwry 
the  scale  of  the  non-unionists.  general  way. 

The  beneficial  financial  results  of  trade  unionism  are  a  matter  nf 
proof  year  by  year.    Occupations  or  areas  of  the  country  on  beiror'n 
ized  almost  invariably  enjoy  higher  wages,  shorter  hours  and   better" 
working  conditions  than  previously.    The  advance  in  doHars  and  cents 
he  shortened  work  day  and   better  conditions   are   in   manroccuoa 
tions  to  be  clearly  indicated  by  statistical  presentation      Wa^e  advance 
due  wholly  to  trade  unionism  (the  production  necessary  to  pay  the  scak 
being  taken  for  granted)  is  a  matter  of  record  in  each  of  {he  one  h«n 
dred  and  ten  International  Unions  affiliated  with  the  Federation      ^t* 
LTt     ^h^r"^bership  of  the  American  Federation  of  rabor's  more 

million  dollars  a  year.    Since  there  are  from  one-half  milHon  to  one  mil 
lion   organized   wage   workers   not   in   the    Federation    the   vohime  of 
advance  in  wages  may  thereby  be  increased  to  one  hundrl?  iSllio„ 

of  ques^n^s^fal^^r^^^^^       unaVa^tTd^^^^^^^^^^^^  ^  ^^^^^^^ 

at  liberty  to  form  their  own  convictions  on  the  subiect  Tn  th?^!  ^I! 
of  a  representative  of  the  American  Federation  of  Labor  I  /J?.^."*^ 
SestL°"  *''^  °"^^'°"  ''^^  *°  °''*™'^^  ^y  own^^co'clusio^  oT'thi 

Very  truly  yours, 

(Signed)     J.  W.  SULLIVAN. 

227 


'l   ' ' 


1   ' 


,1  ■ .  ■- 


11 


BRIEF  SUBMITTED  BY  J.  P.  COUGHLIN,  VICE-PRESIDENT, 
THE  CENTRAL  LABOR  UNION  OF  BROOKLYN, 

For  Transferring  Taxes  Levied  on  Buildings  to  Land  Values. 

Organized  Labor  appreciate  that  no  single  measure  will  secure  to  the 
workers  of  the  country  the  value  of  what  they  produce,  and  to  that  value 
they  are  entitled. 

Organized  Labor  endorses,  however,  the  recommendations  of  the 
United  States  Commission  on  Industrial  Relations  made  by  the  three 
representatives  of  organized  labor  on  that  Commission  and  the  Chair- 
man, to  wit: 

"The  forcing  of  all  land  into  use  by  making  the  tax  on  unproduc- 
tive land  the  same  as  on  productive  land  of  the  same  kind,  and  exempt- 
ing all  improvemnets." 

We  endorse  the  transfer  of  taxes  from  buildings  here  to  land  values 
for  the  following  reasons: 

1st.     The  worst  land  monopoly  in  the  world  exists  in  New  York  City. 

Most  of  the  value  of  land  in  New  York  City  is  owned  by  a  few 
thousand  people — a  thousand  families  own  an  average  of  nearly  a  mil- 
lion dollars  worth  of  land,  while  several  families  own  from  five  to  twenty 
millions  worth  of  land.  Taxing  land  values  more  heavily  will  compel 
these  families  to  pay  more  nearly  a  fair  share  of  the  governmental  ex- 
penditures, which,  together  with  the  presence  of  the  population,  have 
given  the  land  they  hold  its  value. 

2nd.     It  will  give  better  housing  at  lower  rents. 

Taxes  levied  on  buildings  limit  the  supply  of  buildings,  and  so  keep 
rents  high. 

Rents,  like  wages,  are  determined  chiefly  by  the  law  of  supply  and 
demand.  A  large  proportion  of  the  workers  of  the  city  are  obliged  to 
live  in  crowded  quarters,  unsanitary  and  unsafe,  because  the  present 
tax  system  makes  this  sort  of  building,  paying  very  little  taxes,  more 
profitable  than  healthy,  safe  tenements.  No  civilized  city  would  permit 
its  population  to  be  housed  as  are  the  majority  of  the  people  of  New- 
York  City,  and  at  very  high  rentals. 

3rd.     It  will  increase  home  ownership. 

Taxing  buildings  at  the  same  rate  as  land  values  permits  the  hold- 
ing of  large  acreage  tracts  out  of  use  in  all  boroughs  of  the  city,  except 
Manhattan,  until  they  can  be  sold  to  would-be  small  home  owners  at 
speculative  prices.  The  present  system  also  compels  the  owner  of  a 
small  home  to  pay,  on  the  average,  nearly  four  times  as  much  taxes  as 
the  owner  of  a  vacant  lot  adjoining,  although  the  construction  of  such  a 
home  increases  the  selling  price  of  vacant  lots  nearby. 

Transferring  taxes  from  buildings  to  land  values  will  compel  land 
speculators  to  sell  cheaper  to  prospective  small  home  owners,  and  will 
save  small  home  owners  at  least  half  to  three-fifths  of  the  taxes  they 
pay  under  the  present  tax  system,  without  reducing  the  selling  price 
of  their  lots. 

228 


4th.     It  will  make  more  employment. 

Transferring  taxes  on  buildings  to  land  values  will,  as  stated  by  the 
United  States  Industrial  Relations  Commission,  force  much  unused  land 
into  use,  and  stimulate  the  construction  of  buildings,  thereby  giving 
more  employment  directly.  By  reducing  rents  and  taxes  on  small  homes 
it  will  permit  nine-tenths  of  the  population  of  New  York— at  least  a 
million  families — to  buy  more  manufactured  goods  and  produce,  and  so 
give  more  employment  indirectly,  but  just  as  certainly. 

By  retarding  the  speculative  increase  in  the  selling  price  of  land, 
and  reducing  the  total  taxes  or  rent  for  manufacturers,  it  will  encourage 
the  location  of  more  factories  here,  through  reducing  the  fixed  charges 
on  production,  while  keeping  wages  up,  through  the  increased  demand 
for  workers. 

5th.     It  will  make  working  conditions  safer. 

Untaxing  buildings  will  stop  premium  upon  old  firetrap  factories, 
and  the  penalty  upon  constructing  safe  ones.  Fire  prevention  and  labor 
laws  should  be  enforced,  but  government  should  stop  taxing  owners  of 
buildings  heavily  for  complying  with  requirements  of  safety  and  health. 

6th.     It  will  reduce  the  unearned  profits  of  land  speculators. 

The  condition  of  the  workers  of  the  city,  organized  or  unorganized, 
can  be  materially  improved  only  by  eliminating  the  various  privileged 
classes,  who  become  wealthy  without  producing  anything,  merely  by 
taking  the  produce  of  the  workers. 

This  involves  several  measures  and  changes,  beside  taking  more  of 
the  ground  rent  for  governmental  purposes.  The  fundamental  unearned 
income  is  ground  rents.  We  favor  a  rapidly  progressive  income  tax  on 
large  incomes  for  the  Federal  Government — but  taking  ground  rents  for 
local  public  expenditures. 


229 


1 


!l 


'•I  ;'! 


U 


-I 


LETTER  OF  CHARLES   F.   NOYES   ON  THE  PROPOSAL  TO 

UNTAX  BUILDINGS. 

CHARLES  F.  NOYES  COMPANY, 

Real  Estate, 

92  William  Street, 

New  York. 

November  12,  1915. 

Laurence  Arnold  Tanzer,  Esq.,  Executive  Secretary, 
Committee  on  Taxation, 

Municipal  Building,  City. 
Dear  Sir: 

Thanks  for  your  recent  letter,  and  the  two  reports  prepared  for  your 
Committee  by  Dr.  Haig,  in  the  matter  of  halving  or  reducing  the  tax 
on  buildings. 

I  appreciate  your  thoughtfulness,  but  regret  that  I  have  not  made 
a  sufficient  study  of  taxation  to  appear  to  advantage  before  your  Com- 
mittee. It  may  be,  however,  that  you  would  like  to  have  my  ideas  re- 
garding the  problem,  which  we  know  is  receiving  the  best  thought  of 
your  Committee. 

My  experience  of  17  years  in  the  real  estate  business  has  been  an 
active  one,  deahng  almost  exclusively  in  Manhattan  properties.  We  have 
several  hundred  buildings  under  our  control,  including  office  buildings, 
loft  buildings  and  some  apartments.  We  deal  directly  in  a  business  ca- 
pacity with  about  1,500  tenants.  The  result  of  this  business  experience 
leads  me  to  state  that  the  high  points  of  real  estate  value  (intensified 
holdings  as  you  call  them)  are  caused  by  the  following  conditions : 

First :     Natural  advantages, — such  as  Riverside  Drive  for  apartments. 

Second:  Permanent  anchors,— such  as  the  Grand  Central  and  Penn- 
sylvania Stations,  with  their  network  of  transit  facilities,  creating  a  nat- 
urally desirable  location  between  30th  and  50th  streets.  Fourth  to  Sev- 
enth avenues. 

Third:  An  established  Financial  District,  in  which  is  located  the 
New  York  Stock  and  Consolidated  Stock  Exchanges,  the  Coffee,  Cotton 
and  Maritime  Exchanges,  the  Custom  House  and  buildings  owned  by 
insurance  companies,  banks  and  other  financial  interests. 

Fourth :  The  Fifth  Avenue  District,  famous  as  a  high-class  slioppinsf 
center  the  world  over,  and  maintained  as  such  because  of  its  proximity 
to  the  railroad  terminals  and  fashionable  hotels,  etc. 

These  and  a  half  a  dozen  other  examples  which  could  be  cited  are 
logical  reasons  why  ground  has  increased  in  value  so  rapidly  at  certain 
points,  while  other  property  has  remained  stationary,  and  in  some  in- 
stances has  decreased  in  value. 

And,  it  should  be  remembered  that  as  ground  value  has  increased 
so  have  the  taxes  increased.  Halving  or  removing  the  tax  on  buildings 
will  not  make  these  high  spots  of  real  estate  less  valuable  except  in  iso- 

230 


lated  cases.  Neither  will  it,  generally  speaking,  add  materially  to  prop- 
erty values  elsewhere.  People  live,  eat,  play  or  transact  business  in  these 
districts  of  high  property  value  because  there  are  some  strong  business 
or  personal  reasons  for  their  doing  so.  This  has  been  going  on  for  years 
until  to-day  the  large  proportion  of  all  valuable  property  on  lower  Broad- 
way, south  of  City  Hall;  the  most  desirable  locations  in  the  Financial 
District  and  on  Fifth  Avenue  (from  30th  to  50th  streets),  and  practically 
all  of  Riverside  Drive,  is  improved  with  permanent  and  expensive  struc- 
tures, representing  huge  investments,  and  good  for  many  years  to  come. 
At  a  few  points,  particularly  lower  Broadway,  an  over-development  has 
occurred,  and  for  this  reason  we  now  have  accommodations  for  the  next 
ten  years'  growth. 

In  other  sections  (not  those  mentioned  above)  a  large  amount  o! 
vacant  space  exists  because  of  trade  shifts,  which,  until  ten  years  ago, 
were  considered  impossible. 

To  me  it  seems  the  height  of  folly  to  remove  the  tax  on  buildings, 
many  of  great  value,  worth  from  $1,000,000  to  $10,000,000,  and  place  it 
on  ground  entirely.  In  the  "high  spots"  of  value  referred  to  above, 
which  will  change  little  in  character  or  desirability,  little,  if  any,  more 
can  be  secured  from  the  ground  itself,  and  the  taxable  value  of  the 
ground  would  not  be  greatly  increased  by  removing  a  part  or  all  of  the 
tax  on  the  buildings.  Also  as  practically  all  of  the  desirable  ground  in 
these  sections  is  now  permanently  improved  there  would  be  no  stimula- 
tion of  building  construction  here. 

The  objections  I  have  to  the  plan  are,  briefly: 

(a).  It  would  unfairly  partially  relieve  from  taxation  the  owners  of 
our  finest  buildings  in  locations  which  cannot  be  duplicated,  which  are 
the  finest  investments  possible. 

(b).  The  taxes  thus  shifted  from  buildings  of  high  value  repre- 
senting many  millions  of  dollars,  which  would  not  be  profitable  else- 
where and  which  generally  speaking  cannot  be  duplicated  elsewhere,  be- 
cause practically  all  the  desirable  ground  has  been  absorbed,  would  be 
placed  on  the  shoulders  of  owners  of  ground  less  valuable,  which  will 
not  be  made  more  valuable  by  reason  of  the  tax  shift. 

(c).  It  would  lead  to  a  period  of  reckless  construction  in  certain 
neighborhoods  where  there  is  no  economic  need  of  new  buildings. 

Whether  or  not  the  people  and  the  government  should  take  over 
our  real  property  is  a  debatable  question.  I  do  not  so  believe.  Many 
regard  real  estate  as  a  commodity,  the  same  as  the  ownership  of  a  busi- 
ness or  an  investment.  The  present  owners  of  real  estate  when  purchas- 
ing same, — and  in  the  aggregate  very  little  of  our  property  has  come 
down  through  inheritance, — invested  their  money  in  the  belief  that  they 
would  have  the  right  to  do  with  their  real  estate  as  they  saw  fit,  provided 
the  laws  of  the  community  as  to  health  and  order  were  obeyed.  The 
greater  part  of  real  estate  is  mortgaged,  and  the  statements  made  to 
your  Committee  regarding  the  difficulty  owners  are  having  to  pay  their 
interest,  tax  and  governmental  charges,  are  not  overdrawn. 

My  impression  is  that  this  agitation  to  halve  the  tax  on  buildings 
and  shift  the  taxation  to  the  ground  has  the  ring  of  "single  tax"  and 
"government  ownership."  It  does  seem  to  me  that  this  issue  should  be 
settled,  and  the  quicker  it  is  disposed  of  the  better  it  will  be  for  the  com- 
munity, because  these  continued  attacks  on  real  estate,  and  agitation  to 
"do  this  and  do  that,"  are  driving  buyers  out  of  the  market,  and  in  many 

231 


cases  stampeding  owners  to  sell  at  demoralized  prices,  who  have  here- 
tofore considered  real  estate  as  good  an  asset  as  they  could  have.  With- 
out willing  buyers  and  a  ready  market,  real  estate,  which  I  believe  is 
our  best  asset,  depreciates  in  value. 

Personally  I  feel  that  the  strong  should  loolc  out  for  the  deserving 
weak,  and  I  believe  that  this  country  and  this  city  should  give  all  an 
equal  right  to  own  and  develop  their  property,  and  that  the  investor 
in  New  York  real  estate  is  entitled  to  develop  his  land  as  he  sees  fit, 
subject  to  legal  community  regulation  and  the  proper  police  power  of  the 
State.  To  this  end  the  community  and  government  should  not  attack 
and  pull  down,  but  instead  encourage  real  estate  investment,  and  it 
should  not  attempt  to  artificially  force  industry  in  construction  or  create 
by  "theory"  new  centers,  using  methods  not  successfully  employed 
elsewhere.  I  firmly  believe  that  each  citizen  is  entitled  to,  and  has  the 
right  to  demand  the  privilege  of  employing  his  own  intellect  to  decide 
what  he  shall  do  with  that  which  he  has  gained  by  toil  and  industry,  if 
in  his  efforts  he  complies  with  the  laws  of  the  community. 

Hoping  that  this  proposal  will  be  definitely  and  firmly  disposed  of 
by  your  Committee,  and  that  the  agitation  to  change  our  tax  methods 
will  cease,  I  am 

Very  truly  yours, 

C.  F.  NOYES. 


232 


BRIEF  SUBMITTED  BY  THE  SOCIETY  TO  LOWER  RENTS 

AND  REDUCE  TAXES  ON  HOMES, 

For  a  Supertax  On  Land  Values  to  Meet  Increases  in  the  City  Budget 
and  the  City's  Share  of  the  State  Direct  Tax. 

c.  ,'^^.P^''  ^P^t?  <^?st  of  local  government  and  the  city's  share  of  the 
State  Direct  Tax  is,  in  round  figures,  $38.00,  or  $190.00  for  a  family  of 

Mayor  Mitchel  testified  before  the  Joint  Legislative  Committee  on 
Taxation  that,  even  if  the  cost  of  government  can  be  kept  at  its  present 
level,  the  city  will,  in  1920,  have  to  raise,  exclusive  of  the  State  Direct 
1  ax,  $34,554  000  more  than  its  present  budget  of  nearly  $200,000,000. 

Ihe  local  budget  will  be  in  1920  about  $250,000,000,  that  is  assuming 
an  average  increase  of  population,  abc3ut  $47.00  per  capita,  or  $235.00  for 
a  family  of  five,  in  addition  to  the  State  and  Federal  indirect  taxes 

The  per  capita  cost  of  the  Federal  Government  is  about  $7  00,  of 
the  State  government,  about  $5.00 ;  so  that  even  if  there  are  no  unusual 
increases  m  Federal  and  State  expenditures  by  1920,  the  average  charge 
per  family  in  New  York  City  for  the  privilege  of  being  governed  will 
be  around  $300. 

How  New  York  City  is  to  secure  additional  revenue  is  a  matter  of 
concern  to  every  family  in  the  city,  and  the  poorer  or  larger  the  family 
the  more  vital  the  concern.  The  city  cannot  in  its  quest  for  additional 
revenue  ignore  the  similar  need  of  the  Federal  and  State  Governments. 

1  he  term  new  sources  of  revenue"  should  be  discarded,  as  it  is  in- 
accurate. There  are  only  two  sources  of  revenue:  Earnings,  current 
or  accumulated ;  and  Ground  Rents.  It  is  agreed  that  all  taxes,  except 
those  on  Inheritances,  Incomes  and  Land  Values,  can  be  shifted  to  the 
user  of  the  article  or  service  taxed.  It  is  agreed  that  unwise  or  too 
nigh  taxes  can  destroy  almost  everything  except  land  values. 

The  method  by  which  New  York  City  is  to  derive  additional  revenue 
should  be  determined  in  the  light  of  the  fact  that  the  poorer  families 
in  the  city  (wage  earners  and  small  salaried  people)  pay  a  much  larger 
proportion  of  their  earnings  in  indirect  taxes  than  the  wealthier  families, 
and  that  if  the  city  or  state  imposes  a  direct  income  tax  on  individuals 
or  on  the  gross  or  net  incomes  of  corporations,  or  an  indirect  income  tax 
under  the  title  "presumptive  ability  tax,"  the  Federal  Government  can 
collect  that  much  less  by  the  Federal  Income  Tax  and  will  have  to  tax 
the  poorer  classes  more  heavily,  and  even  more  disproportionately  than 
at  present.  This  is  recognized  by  Senator  Ogden  L.  Mills,  Chairman 
ot  the  Joint  Legislative  Committee  on  Taxation,  who  urges  that  states 
and  cities  adopt  the  income  tax  before  the  Federal  Government  dries  that 
tip  as  a  source  of  revenue. 

The  most  radical  advocate  of  the  income  tax  would  not  claim  that 
more  than  $300,000,000  to  $350,000,000  could  be  raised  by  this  tax,  and 
to  raise  this  sum  would  require  rates  similar  to  those  in  the  warring 
r.uropean  nations. 

..  .  I^  there  be  any  justification  for  the  ability  to  pay  theory  of  taxation 
It  implies  the  necessity  for  a  much  more  rapidly  progressive  rate  on 
large  incomes  than  those  of  the  present  law. 

233 


I 


The  Federal  expendiluies  will  probably  increase  by  at  least  $ioo,- 
000,000  to  $150,000,000  within  a  year  or  two.  The  Federal  Government 
needs  every  dollar  that  can  be  raised  by  the  Income  Tax,  and  that  is  pre- 
eminently the  proper  source  for  the  Federal  (lOvernment,  because  prac- 
tically all  incomes  and  fortunes  in  the  country,  not  secured  from  land» 
are  derived  from  country-wide  and  even  world-wide  opportunity. 

Principle  of  the  Income  Tax  for  Local  Purposes  Most  Inapplicable  in 

New  York  City. 

The  time  and  place,  as  well  as  the  tax,  must  be  considered  in  deter- 
mining methods  of  securing  additional  revenue. 

The  city  has  undertaken  public  improvements,  transit  lines,  water 
supply,  etc.,  which  will  be  largely  wasted  unless  the  population  increases 
rapidly  and  is  self-sustaining. 

The  average  per  capita  net  debt,  in  1912,  of  all  cities  having  a  popu- 
lation of  30,000  or  over  was  $68.74.  That  of  New  York  was  $156.57; 
of  Chicago,  $28.62;  of  Philadelphia,  $60.64;  of  St.  Louis,  $33.72;  and  of 
Boston,  $106.42. 

The  financial  benefit  of  many  of  the  improvements  for  which  the 
city's  great  debt  was  incurred,  will  be  realized  within  the  next  few  years 
by  the  land  owners  of  the  city  in  the  increased  selling  price  of  land, — if 
population  increases. 

As  was  clearly  shown  your  Committee  at  its  public  hearings,  high 
selling  prices  of  land  are  a  detriment  to  the  producers  and  workers  of  any 
community,  because  they  compel  the  payment  of  large  ground  rents. 

New  York  cannot  afford  to  make  it  any  more  difficult  or  dis- 
advantageous for  manufacturers  to  locate  here,  and  large  increases 
within  the  next  few  years  in  the  selling  price  of  land  would  militate 
against  the  increase  of  factories  and  industry. 

With  the  present  tax  rate  on  land  values,  the  net  increase  in  the 
selling  price  of  land  would  be  at  least  $1,000,000,000  and  probably 
$1,200,000,000  during  the  next  decade.  Such  an  increase  in  the  selling 
price  of  land  would  require  $50,000,000  to  $60,00,000  more  ground  rent 
to  be  paid  owners  of  land  here  on  this  increase,  than  the  nearly  $250,- 
000,000  net  ground  rents  they  now  receive — before  the  real  producers 
of  the  city  are  requited  for  their  labor  and  industry.  Interest  on  the 
probable  increase  in  selling  price  of  land  here  at  6  per  cent,  amounts  to 
$60,000,000  to  $72,000,000  annually,  a  dead  waste  and  useless  burden  on 
industry,  due  to  unearned  profits  of  land  speculators. 

It  would  clearly  be  to  the  advantage  of  every  one  in  New  York  City, 
except  a  few  land  speculators,  to  have  the  selling  price  of  land  here 
remain  stationary,  or  increase  only  very  little  in  the  future.  This  is 
fully  as  important  for  the  city's  development  and  prosperity  as  securing 
additional  revenue. 

The  two  desiderata  can  be  achieved  effectively  and  equitably  by  re- 
covering annually  for  maintenance  of  government  approximately  the 
increase  in  the  selling  price  of  land  by  a  super  tax  on  land  values. 

In  a  very  few  cases,  this  might  work  temporary  hardship,  but, 
owing  to  the  concentration  of  the  ownership  of  valuable  land  here,  this 
would  be  the  fairest  way  to  secure  additional  revenue  for  local  purposes 
on  the  basis  of  financial  benefit  received.  It  would  also  result  in  reach*- 
ing  those  who  do  not  pay  their  fair  share  of  the  cost  of  local  government, 
and  would  reduce  the  amount  collectible  here  by  the  Federal  Govern-^ 
mcnt,  through  the  income  tax. 

234 


We,  therefore,  recommend  that  all  increases  in  the  cost  of  local 
government  and  the  city's  share  of  the  State  Direct  Tax  be  met  by 
such  a  super  tax  on  land  values. 

The  amount  New  York  City  must  raise  next  year  is,  in  round 
figures,  $213,000,000  or  about  $14,000,000  more  than  this  year.  To 
raise  this  additional  revenue  by  a  super  tax  on  land  values,  would 
require  a  rate  of  only  three  mills. 

With  this  super  tax  rate,  the  one  hundred  families  who  are  the  own- 
ers of  record  of  land  assessed  for  $473,808,075,  located  chiefly  in  Manhat- 
tan,  would  pay  $1,421,424  more  than  at  present.  Under  a  general  tax  rate 
of  two  mills,  approximately  the  increase  in  the  rate  required  to  raise 
$14,000,000  additional  revenue,  they  would  advance  only  $1,262,646. 
because  the  assessed  value  of  the  buildings  of  which  they  are'  the 
owners  of  record  is  only  $I57,5I5>235-  Since  they  would  be  able  to 
shift  practically  all  the  tax  on  their  rented  buildings  to  the  tenants, 
however— that  is  $315,030— their  own  contribution,  out  of  their  present 
ground  rent  of  about  $20,000,000,  would  be  only  $947,616,  or  $473,808 
less  than  they  would  pay  with  a  super  tax  of  three  mills  on  land  values. 

These  hundred  families  include  most  of  the  wealthiest  in  the  city 
and  those  whose  wealth  is  due  to  the  growth  of  the  city's  population 
and  industry,  and  its  expenditures. 

Two  thousand  families  would  pay  approximately  half  of  the  $14,- 
000,000  with  this  super  tax  on  land  values,  because  those  two  thousand 
families  have  been  to  this  extent  the  financial  beneficiaries  of  the  city's 
growth,  industry  and  expenditures. 

The  small  home  owner  whose  site  is  assessed  for  $1,000  and  building 
for  $3,000,  would  pay  $8.00  with  a  general  increase  of  two  mills,  and 
only  $3.00  with  a  super  tax  of  three  mills  on  land  values. 

The  owner  of  a  $30,000  tenement  on  a  $10,000  lot  would  pay  $30.00 
more  with  the  super  tax  on  land  values,  as  against  the  $80.00  he  would 
pay  with  a  two  mills  increase  in  the  general  tax  rate,  of  which  he  might 
collect  $60.00  from  his  tenants,  by  increased  rent,  or  decreasing  service 
now  rendered.  He  would  pay  personally  about  $10.00  more  with  the 
land  values  super  tax  than  with  the  two  mills  general  increase  in  the 
tax  rate. 

The  maintaining  of  the  selling  price  of  land  at  about  its  present 
figure,  and  the  prevention  of  speculative  increases  together  with  the 
knowledge  that  there  would  not  be  any  increase  in  the  tax  rate  on 
buildings  or  machinery  would  encourage  manufacturers  to  locate  here, 
and,  therefore,  be  of  direct  advantage  to  the  city  as  a  whole. 

A  far  greater  advantage  would  be  the  exemption  of  the  tools  of 
production. 

No  fair-minded  person  can  object  to  the  super  tax  on  land  values, 
because  it  does  not  seek  to  aflPect  the  present  selling  price  of  land  mater- 
ially, but  merely  to  recover  for  the  community  the  future  increases  in 
value  of  land  attributable  directly  to  community  activity  and  expendi- 
ture. The  specious,  selfish  and  unfounded  objections  raised  to  trans- 
ferring taxes  from  buildings  to  land  values  cannot  be  urged  against  such 
a  super  tax  on  land  values  which  does  not  aflfect  the  status  quo  but 
merely  acts  for  the  future. 


235 


nS 


J 


I       ■■'! 


n 


.  « 


TESTIMONY 


GIVEN  AT  THE 


PUBLIC    HEARINGS 


November  8-24,   1915 


NOTE. 

The  material  presented  herewith  does  not  comprise  an  exact  and 
complete  record  of  the  hearings.  In  several  cases  the  oral  statements 
of  individuals  were  found  to  be  duplicated  in  briefs  printed  in  this 
volume  and  were  therefore  eliminated.  Exigencies  of  space  made 
necessary  the  reduction  of  the  remaining  testimony  by  approximately 
one-half.  To  accomplish  this  each  individual's  testimony  was  first 
submitted  to  him  for  correction  and  then  edited,  such  portions  as  were 
considered  least  likely  to  be  of  permanent  value  being  omitted. 


J 


FIRST  HEARING. 

November  8,  1915,  2.30  P.  M.,  Room  16,  City  Hall. 
Professor  Edwin  R.  A.  Seligman,  presiding. 


TESTIMONY   OF   MR.   BENJAMIN   C.   MARSH, 

Secretary,  The  New  York  Congestion  Committee,  The  Society  to  Lower 
Rents  and  Reduce  Taxes  on  Homes,  and  The  Business  Men's 

Association  to  Untax  Industry. 

MR.  MARSH:  Mr.  Chairman  and  Gentlemen  of  the  Committee: 
We  advocate  the  transfer  of  the  tax  now  levied  on  buildings  to  land 
values  within  a  period  of  from  ten  to  five  years,  with  a  referendum 
on  this  question  to  the  people. 

The  pubHc  should  know  that  this  Committee  was  appointed  by 
Mayor  Mitchel,  in  repudiation  of  a  pledge  before  his  nomination  not 
to  interfere  with  the  referendum  on  reducing  taxes  on  buildings  in  1914, 
as  was  recommended  by  Mayor  Gaynor's  Commission  on  Congestion 
of  Population,  in  191 1,  after  a  careful  investigation.  It  is  to  the  per- 
sonal financial  interest  of  a  majority  of  your  committee  not  to  have  the 
taxes  now  levied  on  buildings  transferred  to  land  values.  A  report 
against  this  proposal  will  be  the  recommendation  of  a  prejudiced,  if  not 
to  say,  a  packed  jury. 

The  Society  to  Lower  Rents  and  Reduce  Taxes  on  Homes  urges 
a  referendum  on  this  question,  because  the  people  of  the  City  have  a 
right  to  decide  it,  and  the  action  of  the  voters  on  last  Tuesday  on  the 
constitution  of  Elihu  Root  indicates  that  the  voters  will  act  on  their  own 
judgment  and  not  on  the  judgment  of  alleged  experts  seeking  their  own 

selfish  ends. 

We  urge  this  transfer  of  tax  now  levied  on  buildings  here  to  land 
values  regardless  of  the  adverse  effects  upon  a  few  individual  property 
owners  in  the  city,  for  the  following,  among  many  other  reasons: 

1.  Ground  rents  are  the  proper  revenue  for  local  purposes,  since 
all  wise  municipal  expenditures  benefit  financially  only  the  land  owners, 
and  the  people,  and  not  the  land  owners,  create  and  maintain  ground 

rents. 

2.  It  will  reduce  rents  and  taxes  on  small  homes. 

Now  I  have  been  very  much  interested  in  the  report  of  Professor 
Scligman's  speech  at  the  National  Housing  Conference,  on  this  subject. 
I  do  not  know  whether  it  is  accurate  or  not.  It  seems  to  me  that  the 
point  is  rather  clearly  made  there  that  untaxing  buildings  would  lower 

rent.  t^      -j 

I  am  sorry  to  say  that  my  friend,  Mr.  Miller,  the  former  President 
of  the  Borough  of  the  Bronx,  has  overlooked,  in  his  very  lucid  recent 
brief  on  the  subject,  the  fact  that  the  transfer  of  the  tax  to  land  would 
lower  rent.  While  President  of  the  Bronx,  he  warned  land  owners  and 
landlords  in  the  Bronx  as  to  the  effect  of  our  proposed  change,  and 
had  it  written  on  the  official  letter  head  of  the  borough  president  of  the 

238 


Bronx.     I  will  quote  very  briefly   from  Mr.   Miller's  statement.     I  will 
read  the  part  that  refers  to  this  proposed  change: 

The  second  effect  is  that  the  amount  of  tax  taken  from  present  buildings 
and  imposed  on  vacant  and  other  land  causes  an  unnatural  increase  of  build- 
ings on  vacant  property,  which  will  be  built  upon  so  as  to  escape  heavy  taxation. 
The  effect  on  property  having  old  buildings  on  it  will  be  to  decrease  its  value, 
because,  the  tax  on  land  being  increased,  the  old  buildings  must  be  torn  down 
and  new  ones  erected. 

By  stimulating  building  so  that  more  buildings  are  erected  than  would  be 
the  case  under  normal  conditions,  both  new  and  old  buildings  must  compete 
for  the  rame  number  of  tenants,  thereby  causing  a  fall  in  rent,  in  both  new  and 
old  buildings. 

3.  It  will  cause  the  substitution  of  healthful  and  safe  tenements  in 
place  of  the  fire-trap  or  disease-breading  tenements,  in  which  millions 
of  the  city's  population  live,  actually  millions — Mr.  Lawrence  Veiller 
put  the  figure  a  little  over  three  million.  It  will  make  them  more 
profitable  and  attractive. 

It  is  because  the  cheapest  thing  in  New  York  City  is  human  life 
that  we  have  the  present  system  of  taxation.  I  could  wish  nothing 
better  than  that  every  one  of  you  gentlemen  on  this  Committee  who 
does  not  favor  untaxing  buildings  might  be  obliged  to  live  in  one  of 
those  traps — they  are  strictly  legal — live  there  until  you  get  the  first 
touch  of  consumption.  I  do  not  want  you  to  follow  the  sad  fate  of 
the  ten  thousand  people  who  die  there  from  consumption  every  year, 
because  I  do  not  believe  in  fitting  the  penalty  to  the  crime.  You  should 
at  least  have  a  Httle  touch  of  consumption,  just  so  as  to  realize 
that  we  have  twenty-eight  thousand  new  cases  of  consumption  every 
year.  The  only  thing  this  so-called  reform  administration  seeks  is 
the  conservation  of  property  rights  at  the  expense  of  human  rights. 

4.  By  removing  part  of  the  tax  on  production,  industry  will  be 
encouraged  and  the  unemployment  situation  will  thereby  be  helped. 

5.  Thus  it  will  reduce  the  high  cost  of  living. 

6.  It  will  make  those  best  able  to  pay,  and  those  benefited  finan- 
cially by  municipal  expenditures,  pay  a  fairer  share  of  the  cost  of  local 
government,  and  relieve  those  least  able  to  pay,  who  receive  no  financial 
benefit  from  governmental  expenditures,  from  part  of  the  burden  of 
taxes  that  they  now  pay. 

The  poorer  families  of  New  York  City  are  the  heaviest  taxpayers 
to-day.  They  pay  probably  through  indirect  taxation  anywhere  from 
twelve  to  fifteen  per  cent,  of  their  income  for  taxes,  while  I  am  unable 
to  see  how  you  can  figure  out  that  the  members  of  the  wealthiest  class 
pay  anywhere  near  that  percentage  of  their  total  income.  Of  course 
on  that  we  all  agree.  I  believe  that  the  taxes  on  buildings  are  shifted 
to  the  tenants,  and  the  best  proof  from  practical  experience  that  un- 
taxing buildings  will  lower  rent  and  will  reduce  the  profits  of  the  land 
speculator  is  their  own  opposition  to  this.  All  the  theory  I  or  anybody 
else  can  give  you  is  not  one-half  as  substantial  or  one-half  as  weighty 
as  the  opposition  of  the  landlords  and  the  land  speculators  to  this  prop- 
osition. If  they  (Hd  not  have  to  reduce  rents,  and  if  they  did  not  know 
and  admit  they  would  have  to  reduce  rents,  they  would  not  have  gotten 
Mayor  Mitchel  to  break  his  pre-election  pledge  by  appointing  a  tax 
committee  when  the  people  could  have  decided  the  question  on  facts 
already  in  their  possession. 

7.  It  would  encourage  the  construction  of  small  homes. 

289 


8.     It  will  prevent  land  speculation,  the  speculative  increase  in  land 
value,  and  so  release  more  money  for  productive  enterprises. 

It  seems  to  me  that  the  fact  should  be  emphasized  that  if  we  can 
prevent  the  sinking  of  money  unproductively  in  speculative  prices  for 
land   that  much   money   will   be   released    for   productive   enterprises. 
Mayor    Gaynor's    Commission    on    New    Sources    of    City    Revenue,    iu 
January,  1913,  I  believe,  reported  that  the  average  annual  increase  in 
land  values  in  New  York  City  for  a  decade  had  been  one  hundred  and 
fifty  million  dollars.     Now,  assume  their   figures   are   accurate.      I   pre- 
sume the  increase  is  not  as  much  to-day,  because  immigration  has  been 
partially  shut  off  by  the  war  in  Europe,  which  of  course  again  proves 
the  fact  that  the  people  make  land  value.    But  assuming  they  are  correct 
to  even  one  hundred  million  dollars  a  year,  in  order  to  do  business  in 
New  York  City,  if  the  land  is  to  be  used  within  the  next  decade,  a 
billion  dollars  has  got  to  be  sunk  in  profits  to  the  land  speculator,  or 
land-owner,  if  you  prefer  the  less  harsh  but  inaccurate  term,  and  the 
interest    paid    by    them,    before    the    workinj^^man    or    the    manufacturer 
can  get  any  profit.      Perhaps  it  would  be  clearer  if  we  illustrate  by  a 
national  situation.       Farm  lands  in  this  country  increased  from  1900  to 
1910    by  118  per  cent.,  in  round  figures,  fifteen  and  one-half  billion 
dollars. 

9.     It  will  expedite  the  breaking  up  of  the  land  monopoly  in  this 

city. 

A  few  thousand  people  own  most  of  the  value  and  a  large  part  ot 
the  acreage  of  the  land  in  New  York  City.  From  the  only  record  of 
land  ownership  available  in  this  City,  the  Society  to  Lower  Rents  has 
made  a  study  which  we  will  submit  to  you  as  soon  as  it  is  completed. 
The  fact  is  brought  out  that  99  families  own  about  one-ninth  of  the 
value  of  the  land  in  greater  New  York. 

Most  of  the  cost  of  national,  state  and  local  governments  is  now 
borne  by  the  workers,  through  indirect  taxation,  including  consumption 
taxes.      Of  the  federal  expenditures,  amounting  to  about  seven  hundred 
million  dollars,  only  forty-one  million,  one  hundred  and  sixty  thousand 
was  secured  last  year  from  the  income  tax    on  individuals  and  nearly 
six  hundred  and  sixty  million  from  the  workers.      Of  the  state  budget, 
in   round   figures,  of  fifty  million  dollars   in   1914,  three-quarters  was 
secured  from  the  workers  through  taxes  upon  industry  and  the  products 
of  labor.       Of  the  local  budget  of  one-hundred  and  ninety-nine  million 
dollars  this  year,  about  one-hundred  million  dollars  is  secured  from  the 
workers  by  indirect  taxes.      Taxes  on  land  values  cannot  be  shiftea. 
but  come  out  of  the  unearned  profits  of  land  owners.       If  this  transfer 
of  the  tax  on  buildings  to  land  values  does  not  take  place,  the  land 
speculators  in  New  York  City  who  are  now  making  a  net,  annual  profit 
of  nearly  one-quarter  of  a  billion  dollars,  although  some  may  be  losing, 
will  continue  to  do  so  while   the  productive  workers  of  the  city  are 
legally  robbed  of  so  much  of  their  wages  or  incomes  under  the  guise 
of  taxation.       Now    that    is    my    brief    preliminary    statement,     Mr. 
Chairman. 

MR.  TANZER:  If  the  untaxing  of  buildings  should  result  in  the 
construction  of  more  buildings,  and  presumably  larger  and  more  com- 
modious ones,  would  the  effect  be  through  competition  to  reduce  rents 
in  all  buildings  or  only  in  the  older  and  smaller  and  less  commodious 


ones : 


240 


MR.  MARSH:  I  believe  it  would  have  the  tendency,  as  admitted 
by  our  friend  Mr.  Miller,  to  reduce  rents  in  all  buildings  which  arc 
within  the  zone  of  competition. 

MR.  TANZER:  To  what  extent  would  lower  rents,  due  to  larger 
supply  of  buildings  in  New  York  City,  tend  to  attract  population  from 
outside  the  city,  particularly  from  the  suburbs  in  New  York  and 
New  Jersey,  to  which  people  doing  business  in  the  city  have  heretofore 
gone  in  search  of  lower  rents?  To  what  exent,  by  this  increase  in  the 
demand  for  buildings,  would  the  tendency  for  lower  rents  be  checked? 

MR.  MARSH :  That  is  a  problematical  question  which  no  one 
can  answer  definitely  or  statistically.  The  tendency  would  be  unques- 
tionably to  reduce  rents  here,  since  the  people  of  New  York  City  now 
go  to  the  other  side  of  the  Hudson  because  they  see  no  sense  in  being 
taxed  to  pay  the  cost  of  the  government  of  New  York  City  while 
land  speculators  here  make  their  present  profits.  New  Jersey  would, 
also,  doubtless  follow  our  tax  policy. 

MR.  TANZER:  But  assuming  that  they  did  not  do  so,  do  you 
think  that  that  would  be  an  influence  that  would  tend  to  counteract 
the  tendency  toward  lower  rents  resulting  from  the  untaxing  of 
buildings  ? 

MR.  MARSH :  It  might  very  slightly.  There  again  another  factor 
would  be  whether  or  not  we  put  an  income  tax  upon  all  the  workers 
of  New  York  City,  so  that  what  we  would  save  in  rent  we  would  be 
robbed  of  in  the  guise  of  an  income  tax.  That  would  tend  to  keep 
people  out  of  New  York  City.  Another  fact  is  that  the  rate  of  taxes 
on  land  values  is  very  heavy.  If  we  had  a  super-tax  on  land  values 
to  meet  the  increase  in  the  city  budget,  as  recommended  by  the  English 
Parliamentary  Committee  on  Taxes — and  they  recommend  also,  local 
option  in  the  tax  rate — there  would  be  a  tendency  to  much  lower  rent. 
Now,  of  course,  in  Canada  they  have  not  had  the  single  tax.  They 
have  not  had  a  heavy  land-values  tax  where  improvements  in  the  cities 
are  exempted,  with  few  exceptions.  This  is  because  they  have  run  in 
debt  the  same  way  as  we  have  done  here.  We  are  spending  fifty-five 
millions  in  interest  alone  next  year  on  the  city  debt,  nearly  the  le\y  on 
buildings.  If  they  transfer  the  tax  to  the  land  and  raise  in  that  way  the 
additional  revenue  (about  fifty  million  dollars  by  1918),  the  tendency 
would  be  to  reduce  rents  very  much  more  than  if  they  simply  transfer 
the  tax  now  levied  on  buildings  to  land  values. 

I  look  for  permanent  appreciable  reduction  in  rents  in  New  York 
City  under  our  proposal,  but  not  of  course  in  the  first  year.  If  we  make 
the  change  in  a  period  of  nine  equal  reductions  or  ten  equal  reductions, 
by  the  time  it  is  in  effect  there  will  be  a  much  greater  reduction.  If 
the  change  is  made  in  five  years  it  will  be  still  more  rapid. 

Dr.  Haig's  conclusions  are  in  substance  that  this  proposed  change  will 
be  of  great  benefit  to  tenants  and  to  many  small  home  owners.  That  is 
based  not  only  on  the  study  of  the  situation  in  New  York  City,  but  is  based 
upon  his  knowledge  of  conditions  in  Canadian  cities,  where  you  must  re- 
member there  was  a  very  rapid  increase  in  population,  much  more  rapid 
than  New  York  City  ever  had.  When  you  discuss  that  question  of  whether 
rents  were  reduced  by  this  change,  you  must  consider  what  the  rents  would 
have  been  in  that  Canadian  city  with  an  increase  of  ten  or  fifteen  per  cent, 
in  population  a  year,  had  it  not  had  this  added  stimulus  of  land-value 
taxation  and  exemption  of  improvements. 

241 


!     I 


ii 


?t 


m 


v^i 


II 


A  VOICE:  Dr.  Haig  points  out,  does  he  not,  that  there  are 
various  factors  which  would  introduce  friction  into  the  transfer  to 
tenants  of  benefit? 

MR.  MARSH:  He  makes  substantially,  as  was  printed  in  the 
New  York  papers,  the  statement  which  I  gave,  that  there  may  be 
some  friction  for  the  time  being,  because  tenants  would  not  know  the 
facts.  We  will  try  to  show  them  to  the  tenants  so  they  will  be  quite 
alert  to  their  interests. 

PROFESSOR  SELIGMAN:  Do  you  think  that  the  inevitable  re- 
sult of  this  change  will  be  to  reduce  the  value  of  existing  properties  in 
land  in  New  York? 

MR.  MARSH:  I  do  not.  I  think  it  would  be  quite  the  reverse. 
I  think  that  the  probable  result  of  this  change  in  the  system  of  taxation 
will  be  not  to  reduce  the  present  selling  price.  You  cannot  reduce 
the  value  of  the  land  by  changing  the  tax.  The  land  is  just  as  valuable 
whether  the  ground  rents  go  into  the  pockets  of  the  city  or  into  the 
pockets  of  the  land  owners.  But  it  would  tend  to  retard  the  increase 
in  the  selling  price  of  land.  Instead  of  increasing  about  one  hundred 
million  dollars  a  year,  it  would  increase  but  a  very  small  amount.  If 
you  suddenly  untax  buildings,  I  think  there  would  be  a  great  difference. 
We  do  not  propose  any  sudden  change  in  transferring  taxes  on  build- 
ings to  land  value.  We  expect  to  do  it  in  a  period  of  from  five  to  ten 
years.  In  that  case,  I  rather  think  there  would  probably  be  only  a 
small  increase  for  a  few  years  in  the  selling  price  of  land  in  New  York 
City.  This  would  be  the  greatest  boon  to  the  city  that  we  could  ever 
conceive  of. 

PROFESSOR  SELIGMAN:  Do  you  think,  Mr.  Marsh,  that  there 
are  any  parcels  of  land  in  New  York  City  at  present  which  have  not  in- 
creased in  value  in  the  last  year  or  two,  or  which  may  not  increase  in 
the  next  year  or  two? 

MR.  MARSH:  Unquestionably  there  are  some  parcels  of  land 
in  New  York  City,  for  instance,  in  14th  Street  and  23rd  Street,  which 
are  less  valuable  to-day  than  two  or  three  years  ago. 

PROFESSOR  SELIGMAN:  Assuming  that  there  are  pieces  of 
land  m  this  city  which  are  not  increasing  in  value,  would  the  supposed 
transfer  of  taxes  from  buildings  to  land  increase  or  decrease  that  selling 
value  ? 

MR.  MARSH :    It  would  depend  upon  a  number  of  factors. 

PROFESSOR  SELIGMAN :  Your  advocacy  of  this  change  is  not 
aflFected,  is  it,  by  the  fact  that  property  rights  of  individuals  will  be 
interfered  with? 

MR.  MARSH :  When  the  rights  of  property,  as  was  clearly  shown 
in  this  city,  kill  off  twenty-seven  thousand  people  every  year  from  pre- 
ventable diseases,  when  the  rights  of  property  conflict  with  the  rights  of 
people,  I  say  that  property  should  make  the  first  concession.  Hitherto 
the  people  have  made  all  concessions,  in  my  judgment.     (Applause) 

PROFESSOR  SELIGMAN :  Are  there,  in  your  opinion,  any  move- 
ments on  foot,  at  the  present  time,  making  for  an  improvement  of  the 

242 


lemvl^^^^^^^  ^'  ^^"^^  y^"  '^y  '^^'  ^his  con- 

Sments?     ^  ''''  ''  ^^'  "^^'^  important  than  these  other 

nn  in^Nei^V^rV^  V  J^^'^  T-  '''"'^  ^^"^  ^^^^^^"^  experiments  going 
f.J  TV.  p  u  .  n  ^^^r  ^^^^^^"^  everything  except  choking  oflF  privi 
lege.  The  Rockefeller  foundation  is  doing  things  I  believe  all  those 
things  are  very  good  in  their  place,  but  untfl  you  can  knock  out  privSeS 
there  is  no  use  of  trying  to  solve  a  problem'  of  poverty.  You  cannot 
do  it^  Long  before  we  advocated  this  taxation  of  land  values,  we  urged 
tthf  T  I  Committee.  We  favored  the  bills  controlling  ?he 
height,  size  and  arrangement  of  buildings.  I  am  going  to  be  frank 
In  New  York  the  case  is  practically  that%he  land  sp^eculftors  have  ^b: 
solutely  knocked  out  all  efforts  to  make  zones  for  buildings  or  to  limit 
their  size  or  height.  They  have  killed  every  effort  to  amend  7hl 
tenement  house  law  so  as  to  permit  the  Tenement  House  Department 
to  vacate  tenement  houses  or  apartments  so  defective  in  light  as  to 
be  unsafe  for  occupancy  and  dangerous  to  life  and  health.  I  doubt  if 
rh"^"^  l'^  F'^^ /V'\''^^.^  ^"  ^^^"^  anything  at  all  until  you  break  down 
t.llf  ?n  ""^  i^i  ^^""^  speculators  in  this  city  which  has  manifested 

Itself  in  many  different  ways.      I  agree  with  Justice  Hughes,  that  all 

cfoi^^^o  '""^^  ^l^  ?^'^^y  ^"  extension  of  the  police  power  of  the 
!h.^;  a  .^^^'"  '•"  I'Y^^y^"  Germany,  as  we  here  call  it,  they  have 
adopted  this  principle  of  taxation  and  they  have  absolute  control  over 
city  development,  as  they  have  in  Paris  and  in  Vienna.  In  England 
they  have  the  town-planning  act.  Even  in  this  country  the  belief  is 
growing  that  the  land  values  are  for  the  benefit  of  the  entire  people. 
You  must  give  land  values  to  the  people  who  make  them. 

of  th^^.^lV^.^?^i!,-  ^'■^  ^""^  ""^^  ^^^^^  °^  the  fact  that  the  limitation 
hv  rll^  T^  b^^ldings  and  the  zoning  system  has  been  supported 
by  real  estate  owners  ?  ^^ 

out  tWtf.v  hfn".;  ^^T  '°'"'  u""'.  ^y  ^  f"^-  Land  owners  found 
Z-fh^H  F  ^"^  shooting  their  land  values  all  to  pieces  by  their 
methods  of  construction.  They  found  they  were  hurting  their  own 
land  values,  so  they  came  around  to  see  us,  and  said,  "Let  us  pull  ^° 

£S!*°  '"'''*  ''"^  "''"'""       ^°*  '^''  '^'y  caVed  for  the  dear 

fart  ^h^;  LJNDNER :  Outside  of  the  question  of  motives,  is  it  not  a 
III  *''**  *•"*  movement  to  hmit  the  height  of  buildings  by  increasing 
the  amount  of  vacant  space  required  and  to  create  zones  is  now  beini 

oK'/  Y  ""n'  '''T  °^™^^'  •  •  '^^^  f^"  '^  '^^'  "°t  °"'y  recently  bu? 
iac  TT.U  ^^  *""^  ^^f  commission  which  has  been  studying  this  subject 
has  had  the  support  and  advice  of  the  responsible  organization,  and  thev 

tsin^'hf '"^  ^vl'i  i''  '^'''  "''''""■  They  believe  that  better 
nousing  can  be  accomphshed  by  that  means. 

MR.    MARSH:      Better   housing   at   higher   rent-   ves        That    i< 
just  exactly  what  all  restrictive  legislation  does  ^ 

It  .^^-  LINDNER:  Will  it  bring  about  higher  rents  of  necessity' 
It  only  requires  that  there  shall  be  accommodalion  for  the  people  who 
mu^t  be  accommodated.     There  may  be  a  more  competitive  use  of  ihe 


..;J 


.w 


MR.  MARSH :  Precisely.  As  long  as  you  have  the  present  system 
of  taxation,  it  means  taxes  in  restraint  of  trade  in  buildings.  If  you 
remove  that  tax  you  cannot  tell  what  will  take  place.  You  do  not 
try  to  enforce  the  tenement  house  law  as  to  overcrowding  because  it 
cannot  be  done.  How  can  you  say  that  the  tax  on  land,  with  buildings 
free,  will  reduce  rents  while  the  tenement  house  law  increases  rents? 

MR.  LEUBUSCHER :  Does  the  fact  that  immigration  has  practi- 
cally  ceased  account,  at  least  in  part,  for  the  fact  that  land  values  are 
stagnant? 

MR.  MARSH :  I  think  that  is  so.  The  real  estate  people  admit 
It  and  are  praymg  for  a  cessation  of  the  war,  so  that  land  values  would 
go  up  again  here. 

MR.  LEUBUSCHER:  Is  it  true  that  the  tendency  to  decrease 
selling  values  by  the  transfer  of  taxes  from  structures  to  land  would 
bring  about  a  lesser  capital  loss  than  the  annual  increase  by  reason  oi 
the  ordinary  natural  increase  of  land  value?  Do  you  think  they 
balance  each  other,  or  do  you  think  that  the  ordinary  increase  is  greater 
than  the  amount  of  capital  loss  which  would  be  caused  by  the  transfer? 

MR.  MARSH:  The  assessed  value  of  land  to-day  in  New  York 
!r  n  '^'  x"t  ^^"^^  figtires,  four  billion,  six  hundred  and  sixty  million 
dollars.  Now  that  is  with  a  tax  rate  on  the  average  of  nearly  two  per 
cent  In  other  words,  that  is  supposed  to  be  the  capitalized  ground 
iW  K  ^u.^  ""^  P^^/ent.,  net.  Now,  suppose  in  order  to  untax  build- 
ings by  the  transfer  of  the  tax  on  buildings  to  land  values,  we  raise  the  tax 
II f.  ^",^^"^,y.^l^^s  to  three  per  cent.     That  would  tend,  of  course,  to  de- 

wnnM  K  '  ^^fi''""  ^^  ^K^^""^'  "  ^^^  ^^^  '^  ^^  «"^  ^^^^  ^he  decrease 
would  be  one-fifth,  or  mne  hundred  milHon  dollars  virtually.  But  there 
would  be  other  factors  operating.     Take  it  on  a  ten-year  basis.     The  land 

of  nfnV^?rr'/"'i^"^;"i1  "'^"^^^  ^^"^^^  ^  y^^^-    Then  the  depreciation 
crea  e  nfT.  '      "^^l^on  do  lars  in  the  selling  price  of  land,  through  the  in- 
crease of  taxes  on  lands,  is  offset  by  the  normal  rate  of  increase  in  land 
values  which  would  be  approximately  nine  hundred  and  fifty  million  dollars 
due  to  immigration  and  the  greater  demand  for  land  space,  during  the 

comfng?n.  "'  ''  '''  '^"^^^^-    ^^'''  ^''  "^^^>^  ^^^^^  ciVcumstLces 

MR.     LEUBUSCHER:    The  ordinary  increase  is  fifty  million? 
MR.  MARSH :     I  said  one  hundred  million  dollars 
PROFESSOR  SELIGMAN:     How  much  was  it  last  year? 
MR.  MARSH:    Last  year  I  think  it  was  thirty  million  dollars 
PROFESSOR  SELIGMAN:    How  much  was  it  the  year  before? 

fnr  t?l\^H^^?'  ^^""^^  seventeen  million.  As  a  matter  of  fact 
for  the  last  decade  up  to  last  year,  it  averaged  about  one  hundred  and 
fifty  million  dollars.  That  is  the  reason  I  did  not  claim  one  hundred 
and  fifty  million  for  the  period  of  ten  years  in  the  future 

or  wW.  LEUBUSCHER:  That  one  hundred  and  fifty  million  dollars, 
or  whatever  it  is,  is  land  value? 

MR.   MARSH:     I   beg  your  pardon.       No.       Of  course  we  all 

tW^.r'  •.  *  ^^Fu  ^^^"°'  ^^^  *^^  ^^"^  assessment  jumped  up  so 
that  the  city  could  borrow  a  hundred  million  dollars.  Formerly  the 
assessed  valuation  on   an  average  approximated  eighty-five  per  cent. 

244 


It  was  ninety  per  cent,  at  that  time.  It  has  risen  very  fast.  Part 
of  the  increase  was  what  you  call  an  assessment  increase,  but  not  a 
real  increase.  I  do  not  think  it  is  fair  to  call  all  of  the  increase  in  the 
assessed  value  of  land  during  those  years  a  real  increase. 

MR.  LINDNER:  What  do  you  think  is  the  ordinary  increase  in 
ground  values  in  normal  times? 

MR.  MARSH:  If  you  could  believe  the  people  who  are  selling 
land,  it  is  two  hundred  million  dollars.  Have  you  any  reason  to  think 
that  the  statement  of  Mayor  Gaynor's  Commission  on  New  Sources  of 
City  Revenue,  which  was  worked  to  death,  that  it  was  one  hundred  and 
fifty  million  dollars  a  year,  was  inaccurate? 

MR.  LINDNER:     No. 

MR.  MARSH :  Of  course,  that  is  a  very  hard  thing  to  fix,  as  the 
tax  rate  varies,  but  I  think  that  one  hundred  and  twenty-five  million 
is  a  fair  average. 

PROFESSOR  SELIGMAN:  You  have  referred  several  times  in 
your  picturesque  language  to  the  land  speculator.  Would  you  say 
as  a  fact  that  most  of  the  land  of  this  city  is  owned  by  what  you  call 
land  speculators? 

MR.  MARSH:  My  impression  is  that  the  major  part,  both  value 
and  acreage,  is  held  by  people  who  bought  for  speculative  purposes. 

PROFESSOR  SELIGMAN :    The  small  men  or  the  big  men? 

MR.  MARSH :  Largely,  the  big  men.  Now,  there  are  only  about 
— well,  Mr.  Allan  Robinson  put  the  figures  at  from  one  hundred  and 
twenty  thousand  to  one  hundred  and  thirty  thousand  property  owners 
in  all  New  York  City. 

MR.  STEWART  BROWNE :  There  are  over  two  hundred  thousand 
property  owners  in  New  York  City. 

MR.  MARSH:  Have  you  the  figures?  If  you  have,  you  are  the 
only  man  in  New  York  City  who  has  them. 

MR.  BROWNE:    I  say  that  there  are  over  two  hundred  thousand. 

MR.  MARSH:  My  knowledge  is  that  eight  hundred  families  here 
own  almost  exactly  eight  hundred  million  dollars'  worth  of  land.  I  refer 
to  owners  of  record. 

PROFESSOR  SELIGMAN :  How  much  land  value  is  there  in  New 
York? 

MR.  MARSH :  Four  billion,  six  hundred  and  fifty  million  dollars 
worth. 

PROFESSOR  SELIGMAN :  Are  the  remaining  three  and  one-half 
billions  owned  by  small  people  or  large  people? 

MR.  MARSH:  The  man  who  has  got  a  little  home  does  not 
own  land  worth  much  over  a  thousand  or  fifteen  hundred  dollars.  Is 
that  correct?  Mr.  Leubuscher  is  connected  with  several  loan  asso- 
ciations, and  he  knows  approximately  how  many  small  home  owners 
there  are.      I  should  say  forty  or  fifty  thousand,  and  their  land  holdings 

245 


make  a  very  small  total  of  the  whole  land  value  in  this  city.  Take  the 
great  acreage  tracts  of  the  Astors,  the  Wood-Harmon  Company  and 
others.  The  Wood-Harmon  Company  has  about  twenty  thousand 
lots  in  Brooklyn.  They  have,  in  Prince's  Bay,  Heaven  knows  how 
many  thousands  of  acres,  down  on  Staten  Island.  Oi  course  those 
are  cold  facts  of  land  ownership  which  seem  to  me  of  prime  importance 
for  your  Committee  to  have  ascertained.  It  seems  to  me  those  were 
things  very  valuable  to  ascertain  definitely.  There  are  a  great  many 
small  property  owners,  no  doubt,  but  there  is  also  enormous  and  un- 
precedented concentration  of  land  values  ownership.  I  do  not  consider 
the  man  who  owns  property  worth  forty  thousand  dollars  really  a  very 
small  property  owner.  In  the  small  owning  class  I  will  put  the  man 
whose  total  holding  amounts,  with  a  home  standing  on  it,  to  about  five 
thousand  dollars.  There  are  nothing  like  one  hundred  and  fifty 
thousand  like  those.  Let  me  add  here  that  this  proposal  of  trans- 
ferring the  tax  to  land  value  would  benefit  these  little  men  materially, 
that  is,  assuming  that  there  is  retardation,  decided  retardation,  in  the 
rate  of  increase  in  the  value  of  their  lands,  because  of  the  reduction  of 
their  tax  under  this  proposed  system.  Of  course,  it  is  Manhattan 
Island  that  is  going  to  pay  the  brunt  of  it. 

PROFESSOR  SELIGMAN:  Are  there  any  small  land  owners 
on  Manhattan  Island? 

MR.  MARSH:  Small,  is  a  relative  term;  small  as  compared  with 
Carnegie,  and  large  as  compared  with  the  poor  man  who  is  trying  to 
live  on  what  he  owes. 

PROFESSOR  SELIGMAN:  You  think  that  the  interests  of  the 
small  owners  on  Manhattan  Island  would  suffer  but  that  their  suffering 
would  be  compensated  by  the  advantage  to  the  city  as  a  whole? 

MR.  MARSH :  I  don't  admit  that  they  would  suffer  particularly 
I  thought  I  made  that  clear. 

PROFESSOR  SELIGMAN:  I  thought  you  told  us  that  Man- 
hattan Island  would  suflfer? 

MR.  MARSH :  I  said  it  would  pay  the  larger  proportion.  I  did 
not  say  it  would  suffer. 

PROFESSOR  SELIGMAN:    It  would  not  suffer  then? 

MR.  MARSH :  Nobody  suffers  when  they  pay  for  what  they  have. 
There  are  people  who  get  things  they  don't  have  to  pay  for.  Some 
of  them  inherit  valuable  land.  I  would  suggest,  however,  of  these 
so-called  small  home  owners  who  have,  say  twenty  thousand  dollars 
or  less,  that  their  land  has  gone  up  in  land  value.  I  know,  for  instance, 
a  relative  of  mine  in  this  city  whose  land  has  gone  up  remarkably,  but 
his  building  has  depreciated.  He  did  not  make  the  land  value.'  He 
admits  that.  None  of  the  other  small  owners  have  made  land  values. 
As  they  receive  the  financial  benefit  of  municipal  expenditures,  I  don't 
see  why  they  should  not  be  willing  to  pay  for  it. 

PROFESSOR  SELIGMAN:  You  do  not  think  that  those  who 
bought  land  at  market  values,  in  recent  years,  would  be  a  sufficiently 
larjie  number  to  be  a  factor  of  any  importance?  I  mean  people  who 
have  invested  their  money  in  real  estate  on  Manhattan  Island,  at  market 

246 


rates,  on  the  assumption  that  their  property  was  a  fairly  secure  and 
reasonable  investment.  You  think  what  would  happen  to  them  should 
be  of  no  concern  to  the  committee,  in  view  of  the  great  social  results 
that  you  think  would  follow? 

MR.  MARSH :  I  have  been  unable  to  see  why  government  should 
be  a  sort  of  dry  nurse  for  property  owners  and  merely  a  cruel  step-father 
to  non-property  owners.  Government  has  no  business  to  guarantee 
a  profit  on  any  socially-created  value.  Of  course,  all  restrictive  legisla- 
tion— whether  it  is  on  land  or  upon  what — affirmatively  tends  to 
decrease  the  profits.  I  consider  that  in  this  country  we  have  to-day 
a  conflict  of  property  rights.  I  do  not  think  the  change  we  suggest 
should  be  made  suddenly.  If  you  or  anybody  else  can  suggest  how  the 
people  in  this  country  can  break  up  the  land  monopoly  existing  here 
to-day  in  every  section  of  our  country,  without  curbing  privilege,  I 
should  be  glad  to  learn.  You  are  up  against  it  all  the  time.  You  have 
a  conflict  between  privilege  and  the  working-people.  We  can  call 
it  by  a  more  euphonious  name  if  we  want  to.  The  people  who  do  not 
own  property,  and  nearly  nine-tenths  of  these  in  New  York  City  do  not, 
have  certain  rights  which  are  in  conflict  with  those  of  the  property 
owners.  Whenever  a  child  labor  law  was  passed  there  was  the  same 
old  howl  raised  against  it. — "You  are  robbing  us  of  our  property  rights." 
When  we  passed  the  tenement  house  law,  the  same  howl  went  up. 
Every  effort  you  make  to  improve  economic  conditions  in  this  country 
is  always  met  with  that  same  howl  and  cry,  "You  are  interfering  with 
our  property  rights" — when  in  fact  you  are  interfering  with  property 
wrongs. 

TESTIMONY  OF  MR.  STEWART  BROWNE, 
President,  The  United  Real  Estate  Owners'  Association. 

(NOTE. — Since  the  substance  of  Mr.  Browne's  direct  statement 
is  included  in  his  brief  (cf.  supra,  pp.  162,  208),  it  is  not  repeated  here.) 

PROFESSOR  SELIGMAN  :  Do  you  consider  the  common  opinion 
as  to  the  land  speculator  to  be  a  fallacious  one? 

MR.   BROWNE:     Absolutely. 

PROFESSOR  SELIGMAN:  You  think  that  speculation  some- 
times does  good  and  that  it  is  does  not  always  harm? 

MR.  BROWNE:  I  think  that  ninety  per  cent,  of  speculation  is 
good. 

PROFESSOR  SELIGMAN:  Would  you  make  any  distinction 
between  land  speculation  and  speculation  on  the  stock  and  produce 
exchanges,  which  everyone  believes  is  normally  useful?  Would  you 
say  that  land  speculation,  although  not  organized  in  the  way  in  which 
speculation  on  the  stock  or  produce  exchange  is  organized,  also  has  its 
uses? 

MR.  BROWNE:     I  think  it  is  more  beneficial  to  the  community. 

PROFESSOR  SELIGMAN:  You  think  that  the  land  speculator 
is  a  useful  member  of  society? 

MR.  BROWNE:  Absolutely.  He  takes  chances  that  no  other  man 
takes.     Most  of  them  are  sweating  blood  by  reason  of  the  chances  that 

247 


^1 


they  have  taken.  The  speculator  puts  in  drains  and  sewers  and  fixes  up 
the  street  and  builds  houses  for  the  purpose  of  renting  them  or  selling 
them.  They  "hock"  everything  they  have.  They  don't  own  a  cent. 
Afterwards  they  often  find  that  the  loan  is  called  in  and  they  are  wiped 
out. 

PROFESSOR  SELIGMAN :  Would  you  deny,  however,  that,  in 
so  far  as  the  land  speculator  keeps  building  land  out  of  use,  he  may  also 
be  doing  something  anti-social? 

MR.  BROWNE:  I  do  not  think  that  the  land  speculator  keeps 
land  out  of  use  when  he  sees  a  profit.  He  only  keeps  the  land  out  of 
use  when  it  doesn't  offer  a  profit.  He  carries  it  along  very  often  at 
a  loss.  I  have  known  people  living  in  Germany  and  in  England  who 
bought  land  along  Jerome  Avenue  away  back  thirty  years  ago,  and 
to-day  you  could  not  get  for  it  what  has  been  paid  in  taxes  and  special 
assessments. 

PROFESSOR  SELIGMAN:  Would  this  be  a  fair  statement  of 
your  point  of  view?  The  preceding  speaker  maintained  that  the  result 
of  this  change  would  be  great  social  advantages  to  the  community  as  a 
whole,  especially  to  the  poorer  classes  or  submerged  tenth  and  that 
there  would  be  in  all  probability  no  very  great  injury  to  the  land  own- 
er, and  he  added  that  even  if  there  were  an  injury,  it  ought  to  be  borne  for 
the  sake  of  the  greater  good.  You,  on  the  contrary,  take  a  diametrically 
opposite  position. 

MR.  BROWNE:     Absolutely. 

PROFESSOR  SELIGMAN :  You  say,  in  the  first  place,  that  the 
alleged  social  advantages  are  chimerical  and  that  the  disadvantages  are 
very  real. 

MR.  BROWNE:    Yes. 

MR.  LEUBUSCHER:  Mr.  Browne,  during  the  course  of  your 
remarks  you  frequently  used  the  word  "single  taxer."  Are  you  aware 
of  the  fact  that  this  committee  is  not  considering  the  single  tax  propo- 
sition ? 

MR.  BROWNE:     I  understand  that  thoroughly. 

MR.  LEUBUSCHER:  You  said  you  didn't  know  of  any  man 
who  wants  to  keep  land  out  of  use  when  he  sees  a  profit? 

MR.  BROWNE:     I  said  speculator.     I  did  not  say  anybody. 

MR.  LEUBUSCHER:     Well,  then,  any  speculator? 

MR.  BROWNE:     If  he  can  make  a  profit. 

MR.  LEUBUSCHER:    If  he  can  unload  at  a  profit  he  will  unload? 

MR.  BROWNE :    As  a  rule  he  does. 

MR.  LEUBUSCHER:    Does  that  include  the  Astors? 

MR.  BROWNE:  They  are  not  speculators  in  the  sense  of  the 
term. 

MR.  LEUBUSCHER:  Are  you  aware  of  the  fact  that  the  land 
values  of  the  Astors  exceed  their  improved  values  about  four  to  one? 

MR.  BROWNE:  Suppose  they  do,  what  then?  That  may  be 
beneficial  to  the  city. 

MR.     LEUBUSCHER:    You  say  it  is  a  benefit? 

248 


MR.  BROWNE:     I  said  it  may  be.     I  do  not  know  as  a  fact. 

MR.  LEUBUSCHER:  If  you,  instead  of  having  that  elegant 
Broadway  and  Maiden  Lane  Building,  should  own  that  corner,  and  put 
up  a  hut  on  it,  it  is  a  good  thing  for  the  community? 

MR.  BROWNE:     It  may  be. 

MR.  LEUBUSCHER:    For  the  City  of  New  York? 

MR.  BROWNE:  If  limiting  the  height  of  buildings  is  a  good 
thing  for  the  City  of  New  York,  if  having  parks  and  open  space  and 
breathing-spaces  for  the  people  is  a  good  thing,  then  under-improvement 
is  a  very  good  thing  for  New  York  City. 

MR.  SIMON :  Was  it  not  your  thought  that  men's  speculation  of 
the  past,  that  is,  every  one  of  men's  speculations  in  the  past  up  to  the 
present  time,  has  been  to  the  benefit  of  the  city,  as  compound  interest  is 
to  capital? 

MR.  BROWNE:  Unquestionably  so.  If  it  had  not  been  for  those 
men,  you  would  not  have  the  City  of  New  York  to-day.  You  would 
not  have  any  population.  You  would  not  have  any  enterprises.  You 
would  not  have  any  factories,  but  for  the  so-called  land  speculator.  And 
I  want  to  say,  that  when  I  use  "land"  I  mean  "real  estate"  speculator. 

MR.  SIMON:  If,  as  pointed  out  by  Mr.  Leubuscher,  all  of  the 
vacant  land  now  held  by  such  people  as  the  Astors,  the  Goelets,  and 
others,  all  unimproved  land,  were  improved  to  the  limits  of  what  we 
now  consider  intensive  improvement,  would  the  result  be  that  the  Cit> 
of  New  York  would  be  confined  to  a  very  small  area  or  would  it  be 
spread  out  as  it  is  at  the  present  time? 

MR.  BROWNE:  Well,  I  think  it  would  be  more  compact  than 
if  it  were  overimproved. 

MR.  SIMON:    Would  it  be  a  detriment  or  a  benefit? 

MR.  BROWNE:  It  depends  upon  what  you  are  trying  to  arrive 
at.  As  I  said  before,  my  views  on  that  subject  are  entirely  different 
from  those  of  President  McAneny,  who  believes  that  there  ought  to  be 
city  planning,  that  there  ought  to  be  distribution  of  area  and  that  there 
ought  to  be  height  limit  to  buildings. 

MR.  SIMON:    Would  the  cost  of  government  be  greater  or  less? 

MR.  BROWNE:  It  would  be  less  if  you  had  a  more  compact 
city.  Now,  you  take  Queens  as  an  illustration.  There  is  more  mileage 
of  improved  streets  in  Queens  than  there  is  in  New  York  City.  Look 
at  the  small  real  estate  tax  in  Queens  as  compared  to  Manhattan.  They 
have  more  mileage  there,  and  more  improved  streets  in  Queens  than 
they  have  in  New  York  City.  That  shows  you  how  the  more  compact 
a  city  is  the  less  the  cost  of  government. 

MR.  SHIPLEY:  Mr.  Browne,  you  are  President  of  the  United 
Real  Estate  Owners'  Association? 

MR.  BROWNE:     I  am. 

MR.  SHIPLEY:     How   many   members  has   that   association? 

249 


I 

I 
I 


iiiii 


MR.  BROWNE:     Nine  thousand. 

MR.  SHIPLEY:    Are  they  all  real  estate  owners? 

MR.  BROWNE:    Yes,  sir. 

MR.  SHIPLEY:  Do  you  know  the  aggregate  value  of  their 
holdings? 

MR.  BROWNE:  I  would  place  it  roughly  at  approximately  three 
hundred  million  dollars.     It  is  possibly  more  than  that. 

TESTIMONY  OF  MR.  HERBERT  E.  JACKSON, 

Vice-President,  Lawyers*  Title  and  Trust  Company. 

MR.  JACKSON:  Mr.  Chairman,  in  my  opinion,  the  basis  of 
taxation  in  a  city  is  rent.  It  is  impossible  to  separate  the  ground  and 
the  improvement  upon  the  ground  in  the  matter  of  rent.  When  you 
come  to  base  taxation  on  rental  values,  the  separation  of  the  two  items 
is  not  possible. 

For  the  present  and  for  a  number  of  years  past  in  New  York  City 
there  is  a  very  large  amount  of  vacant  land  seeking  improvement.  The 
only  reason  it  has  not  been  improved  is  that  people  have  not  been 
found  who  are  willing  to  invest  or  put  money  in  it.  Now,  as  soon  as 
tenants  are  forthcoming  buildings  will  be  forthcoming  also.  The  city  is 
not  ready  for  it. 

PROFESSOR  SELIGMAN:  You  think  then  that  the  inclusion 
of  the  improvements  is  a  necessary  thing,  and  that  the  exemption  of  im- 
provements cannot  be  accomplished  by  any  system  of  taxation? 

MR.  JACKSON :  No ;  but  I  think  it  is  dangerous  to  try  it  out,  be- 
cause it  would  be  attempting  by  artificial  means  to  promote  what  is  a 
natural  routine  course  of  development.  If  you  force  an  improvement 
and  should  put  up  a  hundred  thousand  dollar  building  on  a  plot  which 
to-day  only  carries  a  twenty  thousand  one,  it  is  an  economic  waste  of 
the  difference  for  the  period  until  conditions  have  grown  up  to  it. 

PROFESSOR  SELIGMAN:  Is  there  any  such  thing  in  the  city, 
to  any  practical  extent,  I  mean,  as  holding  of  land  out  of  use? 

MR.  JACKSON :  I  think  not.  Of  course,  you  may  find  an  indi- 
vidual here  and  there  if  you  go  around  and  look. 

PROFESSOR  SELIGMAN:  Would  it  be  wise  to  untax  build- 
ings and  to  put  the  burden  on  the  land  ?  ' 

MR.  JACKSON :    No,  sir;  I  think  it  would  be  very  unwise. 

PROFESSOR  SELIGMAN:  If  there  were  two  adjoining  vacant 
lots,  each  worth  one  hundred  thousand  dollars,  and  if  you  were 
confronted  with  the  question — shall  I  put  a  low  house  on  the  one  and 
a  higher  house  on  the  other? — do  you  think  that  you  would  not  be  af- 
fected at  all  by  the  question  as  to  whether  that  structure  was  going 
to  be  taxed? 

MR.  JACKSON:  I  should  be  affected  by  the  knowledge  of  what 
the  tax  would  be,  of  course. 

MR.  TANZER:  That  is  to  say,  the  tax  is  only  one  of  the  ele- 
ments entering  into  the  probable  income. 

MR.  LEUBUSCHER:  You  say  that  the  basis  of  taxation  is  rent. 
Then  a  vacant  lot,  for  instance,  at  the  corner  of  Broad  and  Wall  Street, 

250 


would  not  be  taxed  at  all — should  not  be  taxed — because  it  was  not 
producing  any  rent? 

MR.  JACKSON:  In  those  cases  there  would  have  to  be  an  esti- 
mated rent,  I  presume. 

MR.  LEUBUSCHER:  A  very  small  rate?  If  a  tract  of  land  on 
Wall  Street  were  sold  to-day  for,  let  us  say,  five  million  dollars,  but 
was  vacant,  would  you  simply  tax  it  as  agricultural  land? 

MR.  JACKSON:     Yes. 

MR.  LEUBUSCHER:  You  say  that  you  do  not  know  of  any  land 
held  out  of  use? 

MR.  JACKSON:  Generally  speaking  none,  except  in  isolated 
cases. 

MR.  LEUBUSCHER:     Did  you  ever  travel  in  The  Bronx? 
MR.  JACKSON :     Very  often,  yes    sir. 

MR.  LEUBUSCHER:  Did  you  ever  see  any  big  signs  on  the 
big  Astor  estate  there  reading,  "Not  for  sale"? 

MR.  JACKSON:     I  have,  I  think  so. 

MR.  LEUBUSCHER:     Was  that  land  held  out  of  use? 

MR.  JACKSON:     I  have  no  information  about  it. 

TESTIMONY  OF  MR.  RICHARD  M.  HURD, 

President,  Lawyers'  Mortgage  Company. 

MR.  HURD:  As  a  citizen,  I  am  in  favor  of  anything  which  will 
benefit  the  masses  as  against  the  classes.  I  think  that  a  reduction  of 
the  rate  of  taxes  on  buildings  would  have  a  desirable  social  consequence, 
but  I  think  it  should  be  operated  with  a  broader  plan,  to  include  town 
planning,  laying  out  of  zones,  limiting  the  height  of  buildings,  and,  if 
the  thing  is  done  thoroughly,  a  constructive  plan  laid  out  for  the  entire 
city.     I  think  there  would  be  very  decided  advantages  in  the  long  run. 

From  the  standpoint  of  a  lender  I  think  the  important  effects  of 
any  change  which  would  affect  values  would  be  temporarily  unfortunate, 
perhaps  chiefly  from  a  sentimental  standpoint.  But  I  also  believe  that 
the  value  of  land  would  probably  diminish,  or  hold  stationary.  As 
far  as  local  conditions  are  concerned,  we  all  know  that  we  have  gone 
through  a  period  of  severe  liquidation  due  to  local  causes  and  outside 
causes,  and  I  think  we  have  pretty  nearly  reached  the  end  of  them.  I 
hope  so,  at  least.  When  the  tide  has  turned  and  New  York  real  estate 
becomes  more  active,  it  may  be  a  better  time  to  put  this  change  into 
effect  than  when  values  are  tending  downward. 

I  take  it  for  granted  the  Committee  will  consider  ultimately  going 
to  the  full  extent  of  freeing  buildings  entirely  from  taxes.  I  should 
lean  towards  a  movement  in  the  direction  of  lightening  the  load  on 
buildings  and  charging  it  somewhat  more  heavily  against  land.  I  am 
not  a  single  taxer.  I  do  not  sympathize  with  the  viewpoint  that  those 
who  operate  in  land  are  all  speculators  and  ought  to  be  criticized.  There 
are  several  classes  of  speculators.  There  is  the  man  who  will  buy  a 
few  acres  and  not  touch  them  until  he  can  make  a  sale.  Then  there  is 
the  man  who  buys  a  few  or  many  acres  and  who  will  do  something 
to  them — lay  out  roads,  build  sewers,  lay  sidewalks,  etc.  Also  there  is 
the  man  who  buys  land  to  build  on.    He  is  in  a  business.    Do  not  class 

251 


t 


III! 


i^lli 


(I't 


i( 


^^^^^^■1 

1 


him  as  a  speculator.  He  is  a  producer.  Like  all  business  men  the  specu- 
lator's work  is  sometimes  of  advantage  to  the  city  and  sometimes  of 
disadvantage.  If  he  will  go  ahead  in  a  normal  way  producing  what 
the  people  want,  can  use  and  pay  for,  and  with  the  knowledge  that 
they  want  it,  he  is  of  decided  service,  despite  his  intelligent  selfishness. 
But  if  he  over-builds,  he  temporarily  hurts  the  city. 

I,  as  a  lender,  am  not  in  favor  of  exceedingly  high  land  values.  I 
cannot  see  any  advantage  to  the  city  as  a  whole  or  to  the  mass  of  the 
people  in  having  land  values  very  high.  It  is  of  interest  or  benefit 
only  to  the  people  who  own  the  land,  I  do  not  care  whether  there  arc 
few  or  many.  As  far  as  the  mass  of  the  five  or  six  million  people  in 
New  York  City  go,  the  lower  the  land  values  the  better  off  they  arc 
because  it  means  they  pay  less  rent. 

I  think  the  most  effective  method  of  reducing  rent  is  by  erecting 
new  buildings.  I  think  it  is  of  great  social  advantage  to  spread  the 
city  over  a  larger  area,  which  can  be  done  by  better  transit  and  by 
laying  out  zones  so  that  a  builder  will  know  just  what  type  of  build- 
ing would  be  permitted.  This  would  be  of  great  advantage  to  lenders 
also.  If  a  loan  is  made  upon  what  proves  to  be  the  wrong  type  of  im- 
provement, do  we  get  any  benefit  from  having  high  land  values?  We  run 
the  risk  of  having  them  dropped  the  same  as  happened  on  Sixth  Avenue. 

As  a  lender,  I  would  not  be  afraid,  but  I  think  most  lenders  would 
be,  if  the  rate  of  taxes  on  buildings  were  less  as  compared  with  land. 
If  this  were  introduced  very  gradually  and  on  a  rising  land  market, 
which,  I  think,  we  will  have  here  as  soon  as  the  war  in  Europe  is  ovei, 
and  probably  sooner,  I  would  not  be  afraid  of  the  effects. 

MR.  TANZER:  Do  you  think,  Mr.  Hurd,  that,  in  order  to  obtain 
the  beneficial  effect  of  a  gradual  reduction  in  the  rate  on  buildings,  it 
would  be  necessary  to  accompany  it  by  some  restriction? 

MR.  HURD:  Limit  the  height  of  buildings.  I  think  it  would  be 
dangerous  to  concentrate  too  many  buildings  on  one  plot.  It  might  be 
well  to  spread  them  over  the  city.  I  would  not  be  afraid  of  a  tre- 
mendous amount  of  new  building.  That  is  influenced  by  other  forces. 
It  is  governed  by  the  amount  of  capital  available,  the  amount  that  will 
be  loaned  on  it,  the  opinion  of  the  builders  as  to  whether  or  not  they 
can  rent  or  sell  their  buildings  and  the  judgment  of  the  lending  forces 
as  to  whether  the  time  is  right  to  lend  money — whether  it  will  pay, 
in  other  words,  to  loan  money  on  new  buildings.  If  the  city  became 
overbuilt,  we  would  stop  loans.  That  would  choke  off  the  speculator 
and  builder.  I  should  say  that  ninety  per  cent,  of  the  building  in  New 
York  City  is  done  on  borrowed  money. 

PROFESSOR  SELIGMAN:  You  say  that  you  think  high  land 
values  would  not  be  good  for  a  community.  Is  there  any  way,  in  your 
opinion,  in  which,  in  a  growing  community,  you  can  prevent  land  values 
from  increasing? 

MR.  HURD:     No,  sir;  I  do  not  know  of  any. 

PROFESSOR  SELIGMAN :  Are  not  high  land  values  the  result  of 
population  and  prosperity? 

MR.  HURD:  Population  heavily  concentrated  causes  high  land 
values.  I  think  that  can  be  modified  somewhat.  If  you  have  good 
transportation,  and  could  limit  the  height  of  buildings,  the  city  would 

252 


spread  out  and  you  would  avoid  to  a  great  extent  this  concentration  of 
population. 

PROFESSOR  SELIGMAN:  What  influence  would  you  ascribe 
to  the  forces  of  taxation  as  compared  with  those  other  influences  of 
which  you  speak? 

MR.  HURD:    Quite  small. 

PROFESSOR  SELIGMAN:  You  are  quite  sure,  in  your  own 
mind,  that  this  whole  matter  of  taxation  is  of  relative  unimportance? 

MR.  HURD:  Yes,  unless  buildings  were  entirely  exempted  from 
taxation.     Then  I  think  it  would  be  of  considerable  importance. 

PROFESSOR  SELIGMAN:  I  understand  you  to  say,  sir,  that 
you  would  not  be  averse,  on  general  economic  reasons,  from  a  slight 
reduction  in  the  rate  of  tax,  but  that  you  would  be  opposed  to  a  total 
exemption  of  the  tax  on  buildings? 

MR.  HURD:  I  would  not  be  afraid  of  it.  I  do  not  know  what 
would  happen. 

PROFESSOR  SELIGMAN:  Then,  with  regard  to  a  slight  re- 
duction in  the  rate  of  tax  you  would  be  in  favor  of  that  only  in  case  it 
was  accompanied  by  these  other  things  ? 

MR.  HURD :     I  think  it  should  be  part  of  a  complete  plan. 

PROFESSOR  SELIGMAN:  Your  general  conclusion  would  be 
that  it  is  well  worth  considering  if  it  were  accompanied  by  other 
schemes  and  especially  if  we  waited  for  a  rising  market,  but  that  other- 
wise you  would  think  it  dangerous? 

MR.  HURD:     Yes,  in  a  falling  market  I  do  not  feel  sure. 

MR.  LEUBUSCHER:  I  understood  you  to  say  that  there  is  no 
way  of  preventing  land  values  increasing  in   a   growing  community? 

MR.  HURD:     I  know  of  none. 

MR.  LEUBUSCHER:  Would  not  some  of  the  speculative  value 
on  the  land,  water  as  it  were,  be  wrung  out  of  land  values,  that  is,  of 
the  market  value,  if  the  tax  on  land  values  were  increased? 

MR.  HURD:     I  think  so,  yes. 

MR.  LEUBUSCHER:  It  appears  that  between  the  years  1906  and 
1914  the  City  of  New  York  increased  its  net  debt  about  five  hundred 
and  fifty  million  dollars  by  such  things  as  water  works,  subways,  school- 
houses  and  the  like,  which,  of  course,  increased  the  value  of  the  land 
necessarily,  did  they  not,  Mr.  Hurd? 

MR.  HURD:     By  bringing  population  in,  not  otherwise. 

MR.  LEUBUSCHER:     Land  value  then    is  population  value? 

MR.  HURD :     Multiplied  by  wealth— affected  by  wealth. 

MR.  LEUBUSCHER:  If  there  were  no  population  here,  tiierc 
would  be  no  value? 

MR.  HURD:     No. 

MR.  LEUBUSCHER: 
tion  value? 

MR.  HURD:     Yes. 

MR.  LEUBUSCHER:  Therefore  these  five  hundred  and  fifty 
million  dollars  of  improvements  were  reflected  in  land  values,  or  land 
values  during  that  period  were  increased  one  billion  two  hundred  and 
fifty  million  dollars  by  reason  of  these  improvements? 

253 


Then  land  value  is  substantially  popula- 


•!i; 


'M 


MR.  KURD:    Yes. 

MR.  LEUBUSCHER:  Would  it,  or  would  it  not  be  just  and 
ethical  to  make  those  people  who  got  the  increase  because  of  the  im- 
provement pay  for  that  increase?  In  other  words,  pay  for  the  debt 
service  of  the  city? 

MR.  HURD:  But  they  were  not  the  only  ones  who  benefited.  The 
entire  community  benefited  by  them. 

MR.  LEUBUSCHER:  The  land  owners— were  they  not  the  only 
ones  who  received  the  financial  benefit? 

MR.  HURD :     No,  I  don't  think  so. 

MR.  LEUBUSCHER:  Will  you  please  point  out  others  in  the 
community  that  received  a  financial  benefit? 

MR  HURD:  Everybody  who  uses  the  subway  gets  a  benefit. 
He  can  do  more  business  by  being  more  rapidly  transported  from  one 
place  to  another.  As  to  the  water  works,  everybody  gets  better  water, 
purer  water,  and  on  the  whole  he  is  a  better  man. 

MR.  LEUBUSCHER:     I  say  financially? 

MR.  HURD:  That  is  financially.  Keep  your  health,  and  you 
get  more  pay.  "^ 

MR.  LEUBUSCHER:  Is  it  not  because  of  additional  transit 
lacilities  that  the  land  owner  puts  more  rent  on? 

MR.  HURD:     In  some  cases,  but  not  all. 

MR.  LEUBUSCHER:  Where  did  the  people  who  got  the  in- 
crease of  land  value  profit,  except  by  increasing  the  rent? 

MR.  HURD :  They  put  some  of  the  tax  value  on.  Some  of  it  is 
not  there.  Mr.  Purdy  put  it  there,  but  it  is  not  there,  I  am  sorry  to 
say.  (LaughterO  May  I  say  that  the  eflfects  of  the  subway's  benefit  are 
very  complex.  The  land  at  each  end  of  the  subway  has  been  benefited 
You  can  get  out  to  the  end  in  forty  minutes.  The  man  who  has  an 
interest  at  the  lower  end  is  benefited.  He  can  have  his  offices  in  a 
convenient  location.  Each  end  has  been  benefited,  at  the  expense  of 
the  middle.  ^ 

DR.  WILCOX:  If  it  be  true,  for  the  sake  of  argument,  that  the 
financial  benefit  of  this  last  amount  of  improvement  has  gone  to  the 
land  owners  as  such,  does  it  not  seem  reasonable— debt  was  incurred 
therefor  you  know— does  it  not  seem  reasonable  that  thev  should  pay 
that  debt  service  of  one  hundred  and  fifty  million  dollars  a  year^ 

MR.  HURD:    I  do  not  think  so. 

DR.  WILCOX:     Why  not? 

MR.  HURD:    They  should  not  be  the  only  ones  to  pay. 

DR.  WILCOX:     Who  else  got  a  financial  benefit? 

MR.  HURD :     Every  person  in  the  city. 

DR.  WILCOX:     Financially? 

MR.  HURD:     Yes. 

DR.  WILCOX:    Has  he  not  paid  for  it  in  rent? 

MR.  HURD:     Yes,  probably  he  is  getting  more  benefit  for  it 

DR.  WILCOX:     How? 

MR.  HURD:     The  new  tenement  law  gives  him  more  benefit. 

DR.  WILCOX:     He  gets  that  from  the  state. 

254 


i 


MR.  HURD :  Then  he  lives  in  a  better  house,  and  he  gets  better 
social  service. 

DR.  WILCOX:  Is  he  not  paying  taxes  for  those  improvements 
in  the  shape  of  increased  rent?  If  the  land  goes  up  in  value  the  land 
owner  is  going  to  exact  a  larger  return  for  it. 

MR.  HURD :  No.  You  get  better  houses.  The  value  of  the  land, 
to  my  mind,  depends  entirely  on  the  net  rent,  that  is  to  say,  the  rent 
after  the  payment  of  all  expenses,  capitalized  by  the  current  rates  of 
interest.  In  a  city  of  this  kind.  New  York  City,  property  is  capitalized 
at  two  and  one-half  per  cent,  in  zones  of  concentration,  three  and  one- 
half  in  the  higher  grade  of  apartment  houses,  up  to  five  and  six  per 
cent,  in  the  poorer  but  less  attractive,  and  seven  and  eight  per  cent,  in 
the  tenement  house  district;  and  disreputable  property  brings  ten  to 
eighteen  per  cent.  It  is  all  graded  up  and  down.  All  capitalized  rates 
change  when  we  have  a  change  in  the  money  rates  of  the  world.  The 
European  war  has  diminished  the  value  of  every  piece  of  property  in 
New  York  City.  Interest  rates  are  higher  now  than  before.  As  soon 
as  it  is  over  and  financed,  and  not  until  then,  will  we  be  in  any  better 
shape.  There  are  two  elements — chief  elements  in  the  value  of  real 
estate:  one  is  rent,  and  the  other  is  the  capitalization  rate.  Rents  are 
lower  to-day  than  three  years  ago. 

MR.  LEUBUSCHER:  The  owner  has  attempted,  has  he  not,  to 
fasten  on  his  tenant  the  additional  tax  he  was  obliged  to  pay  because 
of  debt  service? 

MR.  HURD:  I  don't  think  he  consciously  did.  I  don't  think 
that  enters  into  it  at  all.  He  tried  to  get  all  he  could.  It  all  depends 
upon  supply  and  demand. 

MR.  LEUBUSCHER:  Just  one  final  question.  This  plan  that 
is  now  being  considered  of  gradually  reducing  the  tax  rate  on  im- 
provements during  a  period  of  ten  years — would  that,  if  it  were  adopted, 
affect  the  mortgage  market  appreciably? 

MR.  HURD:  I  would  qualify  my  view  by  saying  that  if  it  were 
put  into  effect  as  part  of  a  larger  plan  with  the  separation  of  the  city 
into  zones,  which  I  think  is  very  scientific  and  sound,  with  the  limita- 
tion of  those  enormously  high  buildings,  I  should  think  the  economic 
situation  would  improve.  There  are  other  factors  to  be  considered. 
But,  putting  it  all  down  together,  I  think  the  total  result  would  be  good. 
It  would  ease  off  the  burden  on  the  man  who  builds  a  building.  It 
would  be  a  slight  encouragement  towards  improving  the  city  and  it 
would  be  a  discouragement  to  the  people  who  hold  land  out  of  use. 
My  personal  view  of  those  who  hold  land  out  of  use  is  that  they  lose 
money  by  it.  I  do  not  consider  them  a  wicked  lot.  I  think  they  arc 
misguided. 

MR.  SIMON:  With  the  exception  of  the  time  when  the  new 
tenement  house  act  was  being  contested  in  the  court,  and  no  building 
was  going  on  in  the  city  at  all,  do  you  remember  any  other  time  when 
there  was  no  building  going  on? 

MR.  HURD :  No.  Operators  got  a  little  ahead  of  the  market  at 
that  time.  They  had  a  little  over-supply,  which  perhaps  made  rents 
go  down. 

MR.  SIMON:  Where  would  the  benefit  come  from  in  encouraging 
l)uilding,  if,  at  the  present  time,  the  building  is  slightly  in  excess  of  the 
<iemand  for  it  ? 

255 


I 


ij: 


!« 


>''  'I 


MR.  HURD:     I  don't  think  it  is. 

MR.  SIMON :    It  is  usually  in  excess  of  the  demand  slightly. 

MR.  HURD:    Yes. 

MR.  SIMON:  And  if  the  reducing  of  taxes  on  buildings  would 
have  a  tendency  to  increase  the  amount  of  building,  Avould  not  the 
lender  or  mortgagee  think  that  his  security  was  meltmg  away  by  every 
project? 

MR.  HURD:    I  do  not  think  it  would  go  that  far. 

MR.  SIMON :    Then  there  would  be  no  benefit  if  it  did  not  go  that 

far?  .       u-  1 

MR.  HURD:  It  would  encourage  building,  but  I  don't  think 
it  would  go  far  enough  greatly  to  lower  values.  I  think  there  would 
be  some  lowering  of  land  values.  Of  all  our  loans  out,  I  hate  to  say  how 
many  millions  were  put  in  land  values  which  were  perhaps  higher,  but 
which  are  certainly  lower  now.  They  were  high  in  boom  times  but  are 
low  now.  It  takes  an  unnecessarily  large  amount  of  capital  to  carry  those 
buildings,  and,  as  a  lender,  I  do  not  favor  these  very  high  values.  I  thmk 
it  would  be  much  better  to  have  the  city  spread  over  a  large  area.  1  don  t 
think  it  can  be  done  in  that  direction  nearly  as  much  as  the  proponent  ot 
this  plan  anticipates.  I  would,  therefore,  move  slowly.  There  are  many 
other  factors  more  powerful  than  taxation. 

MR.  SIMON:  Would,  in  your  opinion,  the  first  effect  of  com- 
mencing any  such  plan  be  a  shock  to  the  real  estate  itself? 

MR.  HURD:    Yes,  sir. 

MR.  SIMON:  Until  people  should  find  themselves,  there  would 
be  danger  of  a  panic? 

MR.  HURD:     I  don't  think  there  would  be  any  panic. 

MR.  MARLING:  Did  I  understand  you  to  say  that  New  York  is 
not  built  up  to-day,  as  a  whole? 

MR.  HURD:  Yes.  There  are  diflferent  classes  of  property.  I 
think  some  classes  of  property  are  overbuilt  and  cause  concentration. 

MR.  MARLING:     What  classes  are  underbuilt? 

MR.  HURD:  I  think  some  of  the  medium  class  of  apartments — 
the  five-story  walk-up.  We  have  had  very  little  building  of  them  in  the 
last  few  years.  I  think  this  is  the  time  to  go  ahead  on  some  of  those. 
On  the  other  kind  I  think  the  operators  have  got  a  little  ahead  of  the 
time. 

MR.  MARLING:    Do  you  think  the  underbuilt  kind  is  in  demand? 

MR.  HURD :    Yes,  sir. 

PROFESSOR  SELIGMAN :  Have  you  given  any  thought  to  the 
effect  this  would  have  upon  rentals  in  diilferent  parts  of  the  city?  Sup- 
pose we  take  off  ten  per  cent,  of  the  tax  on  buildings  and  put  it  on  the 
land.  Would  there  be  an  appreciable  reduction  in  the  rental  of  tene- 
ments ? 

MR.  HURD:    I  doubt  very  much  if  there  would  be  any. 

PROFESSOR  SELIGMAN:    Suppose  we  took  off  fifty  per  cent.? 

MR.  HURD:  I  think  it  would  bite  then.  I  think  the  only  way 
that  would  work,  to  my  mind,  would  be  by  competition  with  other 
buildings.  Of  course,  there  are  other  reasons,  social  reasons.  A  lot 
of  the  people  like  to  be  close  together.    They  must  have  excellent  trans- 

256 


portation  before  you  can  tempt  them  to  go  so  far  away.  That  is  on« 
item  only. 

PROFESSOR  SELIGMAN:  Would  the  reduction  of  rentals  be 
so  great  as  some  of  the  gentlemen  imagine? 

MR.  HURD:     I  don't  think  so;  no. 

PROFESSOR  SELIGMAN:     How  much  less? 

MR.  HURD:     Very  much  less  than  contemplated. 

PROFESSOR  SELIGMAN :  In  regard  to  all  these  alleged  social 
results,  namely,  the  very  great  diminution  in  rent,  which  would  do  away 
with  congestion,  tuberculosis,  etc.,  may  I  inquire  whether,  in  your  opin- 
ion, even  if  the  scheme  went  through  in  the  way  proposed,  these  great 
beneficial  social  results  would  show  themselves  quickly  or  not? 

MR.  HURD:  If  it  were  done  gradually,  I  think  they  would  not 
show  themselves. 

PROFESSOR  SELIGMAN:  They  would  not  show  themselves 
at  all? 

MR.  HURD:  Very  little.  That  would  be  due  to  the  creation  of 
other  buildings  in  competition  with  the  old  ones. 

PROFESSOR  SELIGMAN :  On  the  other  hand,  if,  in  your  opin- 
ion, the  alleged  social  benefits  would  not  ensue,  do  you  also  believe  that 
the  alleged  economic  disadvantages  to  the  owners  of  land  would  not  ensue? 

MR.  HURD :  By  degrees,  only  as  regards  the  value  of  the  land.  I 
think  the  value  of  the  land  would  not  go  up,  though  it  might  sHghtly 
tend  upward. 

PROFESSOR  SELIGMAN :  As  regards  these  great  consequences, 
you  think  tjiat  if  this  were  done  gradually  the  social  benefits  would  not 
come? 

MR.  HURD:    Slowly. 

PROFESSOR  SELIGMAN:    You  think  they  would  come  slowly? 

MR.  HURD:     That  is,  the  whole  result  would  be  slow. 

PROFESSOR  SELIGMAN:  In  other  words,  you  think  that  the 
vvhole  influence  of  this  is  very  much  exaggerated,  both  so  far  as  congestion 
is  concerned,  and  as  to  land  values  generally.  You  consider  this  whole 
matter  of  comparative  unimportance? 

MR.  HURD:  Everything  that  affects  a  large  number  of  people,  if 
the  results  are  in  the  right  direction,  I  consider  of  great  importance. 
I  think  a  gradual  movement  in  the  direction  of  land  taxation,  which 
would  not  seriously  injure  and  cripple  the  present  owners  of  land  who 
l)ought  land  in  good  faith  at  market  prices,  would  be  a  change  in  ihe 
right  direction. 

PROFESSOR  SELIGMAN:  If  you  had  to  choose  among  these 
three  plans,  viz.,  of  transferring  the  tax  on  buildings  to  land,  of  leav- 
ing things  as  they  are,  or  of  gradually  imposing  a  tax  on  unearned  in- 
crement, which  would  you  prefer? 

MR.  HURD:     I  would  prefer  gradually  untaxing  buildings. 

PROFESSOR     SELIGMAN:       Why? 

MR.  HURD :  I  think  if  the  unearned  increment  were  taxed,  it 
would  to  a  greater  extent  discourage  the  speculator.  I  have  gone  on 
record  as  being  against  speculation  and  I  am  against  booming  obvious- 
ly high  values.     From  the  point  of  view  of  the   lender,  that  is  very 

257 


f 


II 


'II 


u 


i 


il 


dangerous.  The  owner  wants  to  have  s.ime  faith  that  sooner  or  later 
he  will  make  a  profit  out  of  land  and  that  it  won't  all  be  taken  away. 
I  think  a  gradual  reduction  in  the  building  tax  would  be  discounted 
figured  on  as  a  firm  amount  and  he  would  know  what  to  count  on  With 
a  tax  on  unearned  increment  we  would  always  be  m  doubt.  1  think 
results  would  work  out  better  in  the  former  case. 

PROFESSOR  SELIGMAN :  We  understand  that  in  the  main 
you  are  not  favorable  to  this  scheme  unless  it  were  conservatively  and 
gradually  carried  out  and  provided  that  it  would  be  accompanied  by 
these  other  measures? 

MR.  HURD:    Yes. 
— Professor  SELIGMAN  :    otherwise  you  would  be  opposed  to 

it? 

MR.  HURD:    Yes. 

DR    WILCOX:  Mr.  Kurd,  do  you  understand  that  the  value  ol 
a  oarcel  of  land  would  be  decreased  by  the  taking  of  the  tax  off  the 
buildTng  and  putting  it  upon  the  land,  if  the  total  amount  of   taxes 
on    he  parcel,  land  and  buildings,  were  less?    Take  a  case  like  this-    A 
pared  of  rea    estate  is  worth  one  hundred  thousand  dollars,  of  which 
sixty  thousand  dollars  is  buildings  and  forty  thousand  dollars  is    and. 
Assuming  that  the  tax  on  buildings   is   entirely   transferred  to   the   land 
in  th^s  particular  case  the  total  tax  on  the  parcel  of  real  estate  wou  d 
be  less,Cwk    he  tax  on  the  forty  thousand  dollars  of  land  value  would 
be  much  greater.     What  would  be  the  .lirect  effect  upon  the  value  o 
that  parcel  of  real  estate?     Assume  also  that  the  total  valuation  o 
buUdings  that  are  affected  is  equal  to  the  total  value  of  land.  What 
would  be  the  direct  effect  upon  the  value  of  the  parcel? 

MR.  HURD:  That  would  be  hard  to  say.  The  net  «t"™  7°"^ 
be  larger  The  point  is  that  the  owner  or  the  loaner  would  feel  that 
Se  taTis  levied  a'gainst  the  land  and  he  would  figure  out  the  tax  on  the 
land  separately.  He  would  say  that  the  building  is  worth  so  much  and 
the  land  is  so^much.  I  think  he  would  feel  the  increase.  The  selling 
price  would  be  less. 

DR  WILCOX :  Is  it  not  true  that,  if  he  built  another  buildmg 
there  the  expenses  of  maintaining  that  other  building  ^^ould  be  less,  and 
the  gross  return  upon  it  or  the  net  return  upon  the  parcel,  both  land 
and  building,  would  be  greater?  ■  ■  u  a 

MR.  HURD :  You  are  arguing  if  the  actual  tax  was  diminished 
the  land  value  would  increase? 

DR    WILCOX:     Would  it  increase? 

MR  HURD-  That  is  very  hard  to  say.  I  think  that  the  taxes 
levied  against  his  ground  valu'e  would  be  discounted  in  the  pnce 
nf  the  land  I  think  it  would  tend  to  make  all  prices  of  land,  that  is,  the 
seling  value  omewhat  less,  although  possibly  they  might  remain  he 
^fnie  What  a  thing  is  going  to  be  worth  in  the  future  is  a  question 
rtiml'.'lU?:nfirel/whft  we  think  it  i^  goi^g  \o  ^^^^ --^J,  ^-- 
the  selling  price  we  get  the  valuation  on  which  the  tax  is  basea. 

DR   WILCOX :    It  is  alleged  by  both  sides  that  this  proposition, 
the  taSng  of  the  tax  off  the  building  and  putting  it  on  the  land,  will 
tend  to  depreciate  the  value  of  the  land. 
MR.  HURD:     That  is  hard  to  say. 

258 


DR.  WILCOX:     Will  the  transfer  of  the  tax  from  buildings  to 
iand  decrease  the  total  selling  value  of  the  real  estate  of  the  ci?f  > 
MR.  HURD :    It  may  do  that.  ' 

.f  fh^f.J^ff^'^^^.L  f*  ^^^^  '>  '°'  ^^"^•^  '*  "°t  ^^  true  that  the  taking 
of  the  tax  off  from  the  and  and  putting  it  on  the  buildings  would  greatly 
increase  the  selling  price  of  real  estate  in  the  city?  Krcauy 

f,^'  ^Hf^lJ'"'  ^^"^""^^  buildings  are  part  of  the  land  they  cover. 

MR.  MILLER:  If  it  is  true  that  the  transfer  of  taxes  to  the 
land  would  not  affect  the  value  of  the  buildings  but  would  greatly  de! 
crease  the  value  of  the  land  and  there  would  be  a  decrease  oYthe^total 
selling  value  of  real  estate,  is  it  conversely  true  that  if  the  tax  now 
levied  on  the  land  was  transferred  to  the  building,  you  would  have  * 
'lui  t  Z'u'V  '^^  I^^"'  °f  '^^  l^"'*'  ^"d  "ot  a  decrease  Inthe 
:at:  o°/rea1  e'sUtt?^'  '"'  -"-<l-"*'y  ^  ^-t  increase  in  the  total 

n,rf^f^f'hf*y^^°'  .1^°'  *°'"  ^^^  '■^^^°"  '*^*^'^  ^''o^e  that  buildings  are 

h  covers  ^  ^^"^  °"  ^  ''"''^'"^  ''  ^'^^  ^  ^^^  °"  t»»^  ^^^<i 

MR   MILLER :    If  the  value  of  the  building  is  decreased  by  an  in- 

de:rL^e°in  tS/'^"  ^'^  ^^'"^  °^  ^''^  '^-'^-'  --*  increase^with^a 

MR.  HURD :     It  only  can  never  go  above  its  structural  value 
MR.  LINDNER :     You  cannot  go  above  that,  of  course 

is  li^iL"  T^°'   ■^''*  ^^^^  are  replacing  materials  all  the  time.  Land 
hJZ  7^  -'^  no  monopoly  in  buildings,  but  there  could  be  a 

hmited  monopoly  in  land.  ^^  "c  a 

t,v  ^^{  LEUBUSCHER:     As  between  an  increment  tax  and  a  super- 
tax on  land  values  m  order  to  take  care  of  the  increase  in  the  budget 
which  would  you  favor?  "uuget, 

MR.  HURD:    A  super-tax  on  land  only,  do  you  mean? 

but  ^^r.W^^y^f^^^^'-     ^°'  *"  '""^^^^  •"  the  general  land  tax, 

0^*1.^  [^     '''^"l*  '"'"^'^'  *^"  P^'  ""*•  O'  S'''  °"  the  increased  value 
of  the  land,  merely  to  take  care  of  the  increase  in  the  budget.     What 

MR.  HURD:     I  should  favor  a  super-tax. 

NOTE— See  the  correspondence  between  Mr.  Hurd  and  Dr   Wil- 
cox, printed  as  an  Appendix  following  the  testimony. 

TESTIMONY   OF   MR.   ALFRED    BISHOP    MASON. 
Representing  the  Manhattan  Single  Tax  Club. 

frotte^^old^f^.^t°.^H     ]  ^^"''^  '''^"  *°-  ^V^S"*  *°  '^'  Committee  a  for- 
gotten old  fact  and  also  a  comparatively  new  plan  about  the  increase 

buifdfngs.""  '"'  '''""  "'"'  "°""  '-^""^  a' reduction  in  tlxes  o„ 

citv  TJiri  ^°''^°"^"  °l'^  ^^ct  's  .that  the  present  owners  of  land  in  this 
city  really  pay  very  low  taxes  instead  of  high  taxes  on  their  lands     aI 

Jnten?'"P  t"l*'  ^''°"'  '""""^^^  *^^^^  ^"-^  based  wholly  upon  thdr 
to  he,  '?  that  present  taxes  are  high,  if  this  contention  can  be  shown 
to  be  untrue,  the  complaints  may  properly  be  disregarded. 

S69 


II 


r     t 


The  real  estate  owners  of  New  York  have  either  inherited  or 
bought  their  land.  Take  a  case  of  inheritance,  Mr.  Vincent  Astor's. 
I  name  him  in  no  invidious  way.  It  is  believed  that  he  means  to  be 
and  will  be  a  good  citizen.  But  a  great  point  has  been  made  before  you 
of  the  taxes  now  levied  upon  his  property.  Now  Mr.  Astor  inherited  all 
his  property  when  it  was  subject  to  a  civic  rent  charge  for  the  benefit 
of  the  community  of  about  i}i%-  The  whole  capitahzed  value  of  this 
civic  rent  charge  was  deducted  from  the  the  value  of  the  property  to 
find  the  value  upon  which  he  paid  an  inheritance  tax.  Do  not  forget 
that  pregnant  fact.  If  a  specific  piece  of  land  inherited  by  him  was  pay- 
ing $6,875  per  annum,  which  at  5%  would  mean  a  gross  value  of  $137;' 
500,  he  paid  an  inheritance  tax  on  but  $100,000,  because  the  existing  civic 
rent  charge  took  $1,875  ^"^  the  net  return  was  therefore  $5,000  which 
justified  an  inheritance  tax  valuation  of  but  $100,000.  If  the  tax  had 
not  been  increased  beyond  i%%,  Mr.  Astor  would  to-day  be  paying 
no  taxes  whatever.  This  year  his  specific  property  is  to  pay  $2,120,  an 
increase  of  $245  or  a  shade  less  than  (me-quarter  of  one  per  cent,  on 
the  value  of  the  inherited  property.  That  quarter  of  one  per  cent,  is 
all  Mr.  Astor  has  to  pay.  You  can  justly  add  a  good  deal  to  ji  oi  ifo 
before  he  can  justly  complain. 

Now  take  a  case  of  purchased  land.  The  same  thing  is  true  of 
this.  If  a  man  to-day  buys  land  with  a  potential  yield  of  $7,000  he  pays 
for  it,  not  the  $140,000  upon  which  $7,000  would  pay  5%  but  only 
$100,000,  because  it  is  subject  to  a  civic  rent  charge  of  about 
$2,000.  The  entire  capitahzed  value  of  the  existing  civic  rent  charge 
has  been  subtracted  from  the  price  he  pays.  If  taxes  are  not  increased, 
he  pays  no  taxes  whatever.  If  they  are  now  increased  to  2.12,  he  pays 
only  Ys  of  1%  in  taxes.  Is  he  entitled  to  complain  of  an  increase? 
So  much  for  the  forgotten  fact. 

Now  for  the  plan  as  to  increment  taxation.  Here,  as  I  appear  as 
one  of  the  witnesses  for  the  Manhattan  Single  Tax  Club,  I  am  bound 
to  explain  that  while  the  club  agrees  with  me  as  to  the  forgotten  fact, 
it  does  not  altogether  agree  with  me  as  to  the  plan.  The  majority  of 
the  members  think  my  plan  is  too  conservative.     Here  it  is: 

Let  every  real  estate  owner  fix  his  own  valuation  upon  his  land, 
subject  to  official  revision  if  need  be.  For  reasons  into  which  I  will 
not  now  enter,  there  will  be  slight  need  of  revision.  Let  him  continue 
to  pay  the  present  rate  of  taxation  upcm  this  valuation.  Let  the  com- 
munity take  annually  5  per  cent,  upon  the  increase  in  the  value  of  the 
land  above  the  assessed  value  the  owner  has  fixed.  You  have  left  him 
all  he  owns  now.  You  have  confiscated  nothing.  You  have  even  left 
him  part  of  the  unearned  increment  of  the  future.  But  you  have  as- 
sured an  ever-increasing  income  to  the  community  from  the  ever-in- 
creasing value  which  the  community  will  give  to  his  land  in  the  future. 

PROFESSOR  SELIGMAN :  We  are  given  to  understand  that  your 
testimony  is  to  the  effect  that  you  would  prefer  to  the  scheme  which 
we  are  considering  the  proposition  for  a  so-called  unearned  increment 
tax.     Do  you  not  wish  to  express  a  preference  in  the  matter? 

MR.  MASON:    I  would  strongly  prefer  both  of  them. 

PROFESSOR  SELIGMAN:    You  would  like  to  have  them  both? 


MR.  MASON:     Yes,  sir. 


260 


I:. 


TESTIMONY  OF  MR.  WILLIAM  J.  SCHIEFFELIN, 
Chairman  of  the  Citizens  Union. 

MR.  SCHIEFFELIN:  In  January,  1913,  the  Commission  on  New 
Sources  of  City  Revenue  made  its  report,  and,  among  other  recommenda- 
tions, suggested  the  advisability  of  having  an  unearned  increment  tax 
imposed.  We  had  studied  quite  fully  this  question  of  reducing  the  tax 
rate  on  buildings  and  improvements.  We  had  several  hearings,  and 
we  came  to  the  conclusion  that  the  argument  that  appealed  to  most  of 
the  people  who  advocated  that  change  was  the  injustice,  as  they  be- 
lieved, of  having  land  values  increased  without  any  efforts  on  the  part 
of  the  owner.  It  so  happened  that  in  foreign  countries,  Germany  and 
England,  an  unearned  increment  tax  had  been  put  into  effect.  Only 
there  they  imposed  a  tax  on  the  transfer  of  the  land,  and  the  Commis- 
sion on  New  Sources  of  Revenue  thought  that  would  be  more  or  less  a 
penalty  on  real  estate  transactions.  We  thought  it  would  be  better,  if 
possible,  to  have  a  uniform  tax  law  that  would  apply  to  all  properties, 
whether  they  changed  hands  or  not.  Now,  the  measure  that  was  worked 
out  was  practical.  We  suggested  that  in  a  given  year  the  assessed  value 
of  all  property  be  taken  as  a  basis  of  valuation  and  that  in  the  follow- 
ing year,  if  the  assessment  increased  by  any  other  reason  than  by  ex- 
penditures of  the  owner  of  the  land,  the  increased  value  should  be  sub- 
ject to  a  tax.  The  rate  was  to  be  one  per  cent.,  so  that  if  there  were  a 
plot  valued  at  one  hundred  thousand  dollars  when  the  basis  was  taken 
and  the  following  year,  or  later,  it  was  assessed  at  one  hundred  and  ten 
thousand  dollars,  the  increase  of  ten  thousand  dollars  should  pay  a  tax 
of  one  per  cent,  over  and  above  the  regular  tax.  And  the  justice  of  that 
appeared  to  be  that,  if  this  increase  was  not  due  to  any  effort  on 
the  part  of  the  owner  but  was  due  to  the  community  value,  he  ought 
to  be  willing  to  give  up  permanently  from  twelve  and  one-half  to 
twenty  per  cent,  of  that  increased  value.  Now,  if  the  land  should  de- 
preciate in  value  automatically  the  tax  would  come  off.  That,  in  brief, 
is  the  suggestion  that  was  made.  Prior  to  that  date,  the  increase  of 
values  in  New  York  City  had  been  such  that  it  was  easy  to  point  to  a 
large  increase  in  revenue  from  this  measure,  besides  satisfying  the 
crav^ij^,  or  feeling  of  jealousy,  on  the  part  of  the  people  who  were  not 
land  owners.  I  would  like  to  suggest  that  this  be  considered  as  a  half- 
way concession  towards  those  who  are  advocating  the  measure  for  the 
reduction  of  the  tax  on  buildings.  That  measure  might  be  very  just 
in  my  opinion,  if  we  were  going  to  build  the  city  all  over  again.  At 
the  present  time  I  think  it  would  not  be  just  at  all. 

PROFESSOR  SELIGMAN:  Do  I  understand,  Mr.  Schieffelin, 
that  the  Commission  on  New  Sources  of  Revenue,  considering  this  very- 
proposition,  finally  came  to  the  conclusion  that  it  would  not  be  wise 
to  adopt  it? 

MR.  SCHIEFFELIN:    That  was  the  unanimous  opinion. 

PROFESSOR  SELIGMAN:  What  was  the  chief  reason  that  led 
you  to  negative  the  proposal? 

MR.  SCHIEFFELIN:  There  were  three  reasons.  You  may  re- 
member that  this  suggestion  was  based  on  the  report  of  the  Commission 
on  Congestion.    Some  of  the  members  of  that  commission  appeared  and 

261 


i 


argued  that  the  measure  would  reduce  congestion.  We  could  not  get 
them  to  make  clear  what  they  meant  by  congestion.  They  agreed,  as 
far  as  I  can  remember,  that  it  would  have  to  be  accompanied  by  measures 
limiting  the  height  of  buildings.  The  second  reason  was  that  it  would 
be  very  unjust.  We  did  not  have  a  report  like  that  of  Dr.  Haig  but  we 
had  enough  statistics  to  show  that  the  gift  to  the  people  who  owned  the 
skyscrapers  along  the  middle  of  the  city  would  be  at  the  expense  of  the 
old  buildings  in  the  other  part  of  the  city.  The  third  reason  was  that 
we  had  a  good  deal  of  testimony  from  men  interested  in  real  estate  and 
lending  money  on  real  estate  to  the  effect  that,  if  it  did  not  create  a 
panic  in  the  mortgage  market,  it  would  depreciate  the  values  of  mortgages 
very  much.  Those,  sir,  are  the  three  reasons  which  influenced  the  com- 
mission. Of  course,  if  the  value  of  real  estate  was  increasing  rapidly 
all  the  time  it  might  be  a  little  different,  hut  that  is  not  so  in  this  city. 
We  thought  the  experiment  was  rather  dangerous  and  that  the  incre- 
ment tax  would  be  a  long  step  in  the  direction  of  satisfying  those  who 
plead  with  a  great  deal  of  earnestness,  and  with  possibly  a  good  deal  of 
justice,  that  the  community  value  ought  to  be  in  part  returned  to  the 
community. 

PROFESSOR  SELIGMAN:  Were  the  members  of  your  commis- 
sion convinced  from  the  testimony  that  the  effects  would  not  bear  out 
the  contention  of  the  advocates  of  this  scheme,  although  you  yourselves 
were  very  heartily  in  favor  of  accomplishing  the  beneficial  social  re- 
sults which  these  gentlemen  desired? 

MR.  SCHIEFFELIN:  We  are  in  favor  of  the  results  they  were 
seeking.  As  a  proof  of  that,  I  will  say  that  this  measure  had  been  in- 
troduced in  the  Legislature  in  the  year  before,  before  our  hearings 
were  held.  Several  organizations  of  which  I  was  chairman  at  that  time, 
among  which  was  the  Citizens  Union,  voted  that  first  year  to  go  to 
Albany  and  support  the  measure,  and  the  succeeding  year  they  did  not, 
on  account  of  the  arguments  that  had  been  advanced  against  it. 


fi 


262 


!  , 


SECOND    HEARING. 

November  lo,  191 5,  2.30  P.  M.,  Mayor's  Reception  Room,  City  Hall, 

Professor  Edwin  R.  A.  Seligman,  Presiding. 


TESTIMONY  OF  MR.  CLARENCE  H.  KELSEY, 

President,    Title    Guarantee    and    Trust    Company,    Representing    the 
Chamber  of  Commerce    of  the  State  of  New  York. 

MR.  KELSEY :  I  thought  it  best  to  take  the  five  major  questions  in 
this  questionnaire  that  has  been  circulated,  and  state  briefly  my  views  as 
to  each  one  of  these  questions. 

First,  as  to  the  effect  of  the  untaxing  of  buildings  upon  land  values 
and  upon  speculation  in  land :  It  will  decrease  the  value  of  land  and 
decrease  most  what  is  least  improved.  It  will  ultimately  kill  speculation 
in  land,  because  it  aims  to  take  away  its  value. 

Second,  as  to  the  effect  of  the  untaxing  of  buildings  upon  building 
operations,  housing  conditions  and  congestion :  If  there  were  too  few 
buildings  it  would  lead  to  erecting  some,  and  would  better  housing  con- 
ditions and  reduce  rents.  But  if  there  were  too  many  buildings,  it  would 
not,  for  there  can  be  no  profit  in  erecting  them.  Under  the  present 
conditions  of  competition,  the  cities  always  run  to  an  over-production 
of  buildings  and  nothing  should  be  done  to  foster  this  tendency.  New 
York  is  suffering  to-day  from  too  many,  with  the  inevitable  result  that 
they  produce  a  poor  return  and  are  falling  in  value. 

Third,  as  to  the  effect  of  the  untaxing  of  buildings  upon  rent:  It 
will  not  reduce  rent  where  there  are  too  many  houses,  as  is  now  the 
case  in  New  York.  Rents  are  too  low  now  and  the  landlord  is  not 
getting  a  fair  return  on  his  money,  and  no  such  reduction  of  taxation 
will  be  sufficient  to  induce  more  men  to  become  landlords,  or  if  it  does, 
it  will  only  add  to  the  ruin. 

I  might  state  that  I  happen  to  be  a  director  in  a  real  estate  cor- 
poration, an  operating  company,  which  owns  over  six  hundred  plots 
of  real  estate  of  various  kinds.  It  has  from  sixty  to  seventy  tenements, 
which  is  the  lowest  renting  property  that  it  has.  The  statistics  for 
that  whole  group  of  buildings  for  the  past  five  years  show  a  net  return 
on  the  cost  of  4.15  per  cent.  Most  of  the  property  is  carried  subject  to 
mortgage.  The  mortgages  are  for  sixty  per  cent,  of  the  value,  and  the 
mortgage  interest  is  five  per  cent,  or  more.  The  result  is  that  this 
company  has  been  working  largely  for  the  mortgagee,  and  has  received 
for  all  its  efforts  2.86  per  cent,  on  its  investment,  or  about  one-half  of 
what  it  would  if  it  had  put  its  money  into  mortgages.  That  would  in- 
dicate that  the  tenant  is  getting  his  rent  for  less  than  he  should. 

Fourth,  as  to  the  effect  of  the  untaxing  of  buildings  upon  public 
revenue  and  upon  public  credit:  It  will  inevitably  reduce  the  revenue 
and  injure  the  credit.  Every  step  toward  confiscating,  by  taxation,  the 
value  of  the  land  lessens  the  desire  to  own  it  and  the  value  gradually 
disappears.  It  is  probably  true  that  there  is  an  over-assessment  in  the 
city  at  large  to-day    of  at  least  five  hundred  millions  of  dollars.     If 

263 


'i-  ■ 


the  half-tax  on  buildings  would,  as  its  advocates  declare,  add  still 
more  to  the  supply  of  buildings  and  reduce  still  more  the  rents,  the 
ruin  of  the  landlords  would  be  still  greater,  the  over-assessment  still 
greater,  and  the  public  credit  still  further  impaired. 

Fifth,  as  to  the  effect  of  the  untaxing  of  buildings  on  mortgage 
loans:  If  the  untaxing  of  buildings  resulted  in  the  single  tax  or  the 
taking  of  all  the  value  from  land  by  taxation,  soon  there  would  not  be 
any  mortgage  loan  business.  It  may  be  the  shortest  cut,  after  all, 
to  higher  rents  and  to  a  permanent  quietus  on  over-building.  We  would 
get  down  to  the  leasehold  basis;  a  man  would  build  a  small  building 
with  his  own  money  instead  of  a  large  one  with  borrowed  money,  and 
there  would  be  no  more  trouble  about  the  too  rapid  growth  of  the  city. 

In  my  judgment,  there  is  no  such  thing  as  the  unearned  increment 
in  land  operations,  except  in  the  sense  that  the  owner  who  carries  it 
unimproved  long  enough  generally  fails  to  earn  any  increment  at  all. 
Whatever  profit  he  does  get  he  earns  as  surely  and  as  fairly  as  the 
man  who  puts  his  money  into  any  other  raw  material  and  carries 
it  with  his  capital  locked  up  until  a  demand  for  it  arises.  In  fact,  he  is 
the  more  entitled  to  it  for  he  has  paid  taxes  on  it  to  the  state,  and  the 
man  who  stacks  up  pig  iron  or  bricks,  woolen  cloth  or  other  personal 
property  generally  escapes  the  tax  gatherer. 

The  advocates  of  the  measure  say  ground  rents  are  proper  revenue 
for  local  purposes  since  all  wise  municipal  expenditures  benefit  finan- 
cially only  land  owners.  They  say  the  people  and  not  the  land  owners 
create  ground  rents.  Not  any  more  than  the  people  create  brick  values, 
or  clothing  values,  or  flour  values,  or  any  other  values.  Demand  creates 
value  for  everything,  and  there  is  just  as  much  sense  in  taking  away 
the  bricks  from  the  man  who  has  made  them,  or  the  clothing  from  the 
man  who  has  made  it,  or  the  flour  from  the  man  who  has  made  it,  and 
giving  it  to  the  people,  as  to  take  the  land  which  the  man  has  invested  in 
away  from  him. 

They  say  it  will  cause  the  substitution  of  healthy  and  safe  tene- 
ments for  the  other  kind.  It  will  do  nothing  of  the  kind.  With  condi- 
tions such  as  exist  to-day,  it  will  have  little  effect  in  stimulating  addi- 
tional construction. 

They  say  that,  by  removing  part  of  the  taxes  on  products  of  labor, 
it  will  encourage  industry  and  help  the  unemployment  situation.  In  the 
long  nm  it  will  cause  unemployment  instead  of  removing  it. 

They  say  it  will  make  those  best  able  to  pay  and  those  benefited  by 
municipal  expenditures  pay  a  fairer  share.  It  is  not  true  that  the 
tenant  and  the  laboring  man  receive  no  financial  benefit  from  govern- 
mental expenditures  or  that  they  bear  an  unfair  burden  of  taxes.  They 
receive  just  as  much  protection  and  benefit  as  the  landlord,  and  under 
present  conditions  the  tenant  is  not  bearinjo^  a  fair  share  of  the  burden 
of  taxes,  and  the  landlord  is  bearing  an  unfair  share. 

They  say  it  will  encourage  the  construction  of  small  homes.  But 
if  the  small  houses  are  not  needed  to  supply  the  demand,  the  encourage- 
ment is  a  mistake  and  the  man  who  builds  will  find  his  property  wor^h 
less  than  it  has  cost. 

They  say  it  will  prevent  most  of  the  speculative  increases  in  laiid 
values  and  so  release  more  money  for  investment  in  productive  enter- 
prises. That  is  true,  and  it  is  about  the  worst  thing  that  could  happen 
to  the  city.  If  there  were  no  speculators  in  land  there  would  be  no 
development  of  the  city.    As  a  matter  of  fact  speculation  in  land  has 

264 


produced  fewer  fortunes  and  is  less  profitable  than  most  other  lines  of 
speculation   or  production. 

PROFESSOR  SELIGMAN :  What  would  you  say  to  the  criticism 
that  speculation  in  land  in  a  city  like  New  York  holds  land  out  of  use? 

MR.  KELSEY:  I  should  say  it  did  not  do  anything  of  the  kind. 
People  are  not  carrying  vacant  land  for  the  fun  of  it.  They  would  like 
to  get  rid  of  it. 

PROFESSOR  SELIGMAN :  Our  attention  was  called  at  the  last 
meeting  to  a  sign  that  used  to  exist  on  an  estate  uptown  on  a  large 
tract  of  land,  "Not  for  sale."  Would  you  say,  from  your  point  of  view, 
that  was  an  exceptional  rather  than  a  typical  thing? 

MR.  KELSEY:  My  experience  is  that  all  land  is  for  sale.  That 
must  be  a  unique  instance. 

PROFESSOR  SELIGMAN :  Your  view  then,  Mr.  Kelsey,  is  that 
the  untaxing  of  buildings  would  not  lead  to  any  very  great  increase  of 
building  operations,  because  the  city  is  now  overbuilt.  Is  that  your 
belief? 

MR.  KELSEY:     Yes,  if  capital  is  prudent. 

PROFESSOR  SELIGMAN:  You  do  not  believe  then  that  if 
buildings  were  untaxed  we  should  have  lower  rents,  much  larger  rooms 
in  each  building,  less  social  evil,  less  over-crowding,  less  tuberculosis, 
etc.? 

MR.  KELSEY:  On  the  contrary,  if  you  take  the  tax  off  building^ 
and  load  it  on  to  the  land  the  tendency  will  be  to  put  as  much  as  pos- 
sible on  to  the  land  to  get  this  back. 

PROFESSOR  SELIGMAN:  Your  idea  is  that  the  untaxing  of 
buildings  would  lead  to  more  intensive  use  of  the  land? 

MR.  KELSEY:  The  owner  will  load  it  up  as  much  as  he  possibly 
can  so  as  to  recover  the  increased  cost. 

PROFESSOR  SELIGMAN:  We  were  told  at  the  last  hearing 
that  a  more  intensive  use  of  the  land  might  be  prevented  by  legislation, 
such  as  limitino^  the  height  of  buildings,  lim.iting  the  space  or  area  they  may 
occupy,  limiting  the  zones,  city  planning,  etc.  What  do  you  think  of  that 
suggestion  ? 

MR.  KELSEY:  That  is  a  good  deal  like  getting  a  man  intoxicated 
and  then  giving  him  something  to  sober  him  up.  I  think  you  had 
better  not  intoxicate  him  in  the  first  instance. 

PROFESSOR  SELIGMA  N :  On  the  opposite  side  of  the  question, 
it  was  intimated  to  us  at  the  last  hearing  that  the  fears  that  have  been 
expressed  as  to  the  bad  results  were  exaggerated,  the  fears,  viz.,  as  to 
the  calling  in  of  mortgage  loans.     What  do  you  think  about  that? 

MR.  KELSEY:  I  do  not  think  they  are  exaggerated.  The  owner 
would  be  precisely  in  the  same  position  as  if  he  had  hired  land  of  Sailors* 
Snug  Harbor  and  paid  ground  rent  to  them.  He  will  not  build  on  that 
because  in  this  city  people  are  not  ready  to  build  on  leasehold  land.  It  is 
impossible  to  get  a  loan  on  leaseholds.     The  lenders  would  feel  that  the 

265 


I 


I" 

I' 


\  'A 


I 


first  step  taken  towards  appropriating  the  value  of  the  land  by  the  city 
was  a  warning  to  them  to  get  out  of  the  mortgage  investment  busmess. 
They  would>call  in  their  mortgages  and  put  their  money  somewhere  else. 
They  would  have  to. 

PROFESSOR  SELIGMAN :  From  practical  experience  as  a  money 
lender,  how  far  would  you  say  that  the  small  man  who  builds  his  own  home 
in  the  suburbs,  borrowing  a  large  part  of  the  money,  counts  upon  the 
gradually  increasing  value  of  that  land  in  order  to  enable  him  to  pay  it  off? 

MR.  KELSEY:  You  have  seen  Joseph  P.  Day's  advertisement  in- 
viting people  to  buy  land.  It  is  entirely  on  the  theory  that  buying  now 
for  $i,ooo,  in  three  years  it  will  be  worth  $2,000,  in  ten  years  $5,000  and 
so  on ;  and  the  small  owner  or  savings  bank  depositor  is  very  much  at- 
tracted by  that.  The  skillful  salesman  convinces  the  small  saver  that 
he  can  become  a  small  Astor  by  buying  some  New  York  City  land,  and 
thousands  of  them  rely  on  and  yield  to  those  blandishments. 

PROFESSOR  SELIGMAN :  Would  you  say  that  if  the  tax  were 
put  wholly  upon  land  it  would  tend  to  induce  the  building  of  more  houses? 

MR.  KELSEY:  It  will  force  them  to  build  houses  that  are  not 
needed  or  carry  the  land  and  pay  a  heavier  tax  than  ever. 

PROFESSOR  SELIGMAN :  Would  this  untaxing  of  buildings,  in 
your  opinion,  tend  to  greater  home  building  by  the  small  man  ? 

MR.  KELSEY:  If  he  does  not  have  to  borrow  money  and  he  is 
content  to  live  in  an  untaxed  house  with  no  increase  from  the  land,  it 
will  work.  < 

PROFESSOR  SELIGMAN :  As  a  matter  of  fact,  are  most  of  the 
houses  of  the  small  men  built  that  way,  on  borrowed  money? 

MR.  KELSEY:  Borrowed  money,  and  with  the  expectation  that 
the  city  will  grow  up  to  it  and  that  the  investment  will  prove  good  to 
him. 

MR.  LEUBUSCHER:  You  stated  if  it  came  to  that  pass,  that 
the  entire  rental  value  of  the  land  was  taken,  there  would  be  practi- 
cally nothing  but  leaseholds? 

MR.  KELSEY:     Correct. 

MR.  LEUBUSCHER:  And  that,  therefore,  no  one  would  want  to 
build  a  costly  structure  on  a  leasehold? 

MR.  KELSEY:    That  is  correct. 

MR.  LEUBUSCHER:  Are  you  familiar  with  the  Bankers'  Trust 
Company  Building? 

MR.  KELSEY:     Yes. 

MR.  LEUBUSCHER:  Do  you  know  that  the  Bankers'  Trust 
Company  erected  that  very  expensive  building  on  ground  leased  at 
$95,000  a  year  from  a  lady  in  Paris? 

MR.  LINDNER:  You  have  not  got  the  facts  right.  It  is  only 
part  of  the  site  that  is  leased  ground.  The  fact  is,  they  would  have  paid 
very  much  more  than  the  funded  value  of  the  rent  for  a  deed  to  that 

266 


property  at  the  time  they  started  to  erect  their  building.  I  am  speaking 
now  from  exact  knowledge  of  the  facts.  I  had  personal  charge  of  the 
transaction.  The  larger  part  of  that  tract  is  fee.  It  is  only  the  extreme 
corner  th^^^^  leased  from^he  lady  in  Paris.  As  I  said  they  would  have 
paid  more  than  the  funded  value  of  the  land  for  a  deed. 

MR.  LEUBUSCHER:  But  they  are  actually  paying  $95»ckx>  to 
a  lady  in  Paris  for  a  portion  of  the  site? 

MR.  KELSEY:    Very  likely. 

MR  LEUBUSCHER:  They  are  doing  it  notwithstanding  and 
they  put  up  an  elegant  building  on  it  despite  the  fact  that  they  had  to 
pay  ground  rent  to  some  other  person? 

MR.  KELSEY:    Yes. 

MR  LEUBUSCHER:  And,  as  a  matter  of  fact,  John  Wanamaker 
has  quite  an  establishment  erected  on  Sailors'  Snug  Harbor  property." 

MR.  KELSEY:  Yes.  The  Sailors'  Snug  Harbor  property  is  a 
blight  on  the  whole  neighborhood  and  that  is  what  would  be  on  all 
property  all  over  the  city.  You  would  find  small  buildmgs  and  no 
speculation  in  land.  If  that  is  what  you  want  you  will  get  it.      ^ 

MR.  LEUBUSCHER:    How  many  land  owners  are  there  m  New 

York  City? 

MR.  KELSEY:     There  are  said  to  be  about  200,000. 

MR.  LEUBUSCHER:    Where  do  you  get  those  figures  from,  Mr. 

Kelsey  ? 

MR.  KELSEY:    Well,  it  is  just  by  computation  of  the  figures. 

MR.  LEUBUSCHER:  I  understood  from  the  Tax  Department 
the  estimate  is  about  95,000  to  100,000? 

MR.  BROWNE:     The  records  show  200,000. 

MR.  LEUBUSCHER:  Assuming  that  there  are  200,000.  and  the 
population  of  the  city  is  5,200,000,  do  you  think  that  the  lack  of  pros- 
perity of  the  few  would  adversely  affect  the  others? 

MR.  KELSEY:  Those  particular  200,000  have  been  bearing  all 
the  burdens  of  the  city. 

MR.  LEUBUSCHER:  Are  you  aware  of  the  fact  that  between 
1906  and  1914,  the  net  increase  in  the  funded  debt  of  New  York  City 
was  $437,000,000? 

MR.  KELSEY:     I  can  quite  believe  it. 

MR.  LEUBUSCHER:  And  the  net  increase  of  the  land  values 
in  that  same  period  was  $1,235,000,000? 

MR.  KELSEY:     I  don't  believe  that  it  was  three  times  the  debt. 

MR.  LEUBUSCHER:  Those  figures  I  obtained  from  the  Tax 
Department. 

MR.  KELSEY:  They  may  have  assessed  it  at  that,  but  it  has  not 
increased  that  much. 

MR.  LEUBUSCHER:     I  am  taking  the  assessed  value. 

MR.  KELSEY:     That  is  a  mistake. 

MR.  LEUBUSCHER:  If  these  figures  be  true,  assuming  for  the 
sake  of  argument  that  the  assessed  valuation  of  the  land  is  the  real  value, 
does  this  not  show  that  the  increase  in  the  land  value  during  those 
eight  years  was  about  three  times  the  increase  in  the  funded   debt^ 

267 


ill   'V 


MR.  KELSEY:  Is  not  a  great  deal  of  that  an  increase  in  the 
assessment  on  construction? 

MR  LEUBUSCHER:  I  am  taking  only  land  values.  Now,  this 
increase  in  the  funded  debt  arose  from  the  building  of  subways,  m- 
creasing  the  water  supply,  school-houses,  etc.  All  of  these  have  a 
tendency  to  add  to  the  value  of  the  land. 

MR.  KELSEY:  I  suppose  they  have.  Is  there  any  reason  why 
the  land  owner  should  not  have  a  profit  on  his  investment?  What  do 
you  think  most  of  the  merchants  have  done  in  that  time? 

MR  LEUBUSCHER:  I  am  not  addressing  myself  to  that.  Most 
of  the  merchants  would  have  been  better  off  if  it  were  not  for  the  m- 
creased  rentals  they  have  been  obliged  to  pay  on  account  of  the  mcreased 
land  values.  ^ 

MR.  KELSEY:  There  has  been  no  increase  in  rentals,  but  a  de- 
crease. 

MR.  LEUBUSCHER:     In  the  aggregate? 
MR.  KELSEY:     By  everybody— a  very  great  decrease. 
MR.  LEUBUSCHER:     There  has  been   less  return  on  the  four 
billion  in  1914,  than  there  was  on  the  $3,367,000,000  in  1908? 
MR.  KELSEY:     Absolutely. 

MR.  SIMON:     You  say  that  there  has  been  less  actual  return? 
MR.  KELSEY:     I  mean  absolutely. 
MR.  LEUBUSCHER:     In  dollars  and  cents? 
MR.  KELSEY:    I  do.     That  is  the  trouble  with  real  estate  own- 
ers and  the  reason  there  is  a  bhght  on  real  estate.  ^ 

MR.  LEUBUSCHER:     Have  you  any  data  to  enlighten  us? 
MR.  KELSEY :    I  am  trustee  of  a  single  estate  whose  rents  went 
down  more  than  $100,000;  expenses  have  gone  up  $80,000,  and  that  is 
typical  all  over  this  city. 

MR.  LEUBUSCHER:    Have  you  any  data  as  to  the  whole  city? 
MR.  KELSEY:    Of  course,  I  have  not.     I  don't  know  everybody's 
business. 

MR.  SIMON:  Do  you  attribute  that  to  anything  special? 
MR  KELSEY:  Over-production— the  very  thing  you  are  trying 
to  produce  by  this  proposition.  From  23rd  Street  clear  down  to  Leonard 
Street  vou  can  find  buildings  vacated  and  ruined  by  the  over-production 
of  buildings  above  23rd  Street,  and  up  there,  one-half  of  them  not  pay- 
ing a  return  to  the  investor.  They  have  beggared  not  only  themselves 
but  others.  You  don't  do  anything  to  correct  the  tendency,  but  you  do 
something  to  increase  it.  It  is  bad  enough,  and  here  you  propose  to  do 
something  to  make  it  worse. 

MR.  LEUBUSCHER:     You  argue  that  this  new  system   would 
lead  to  more  intensive  use  of  the  land? 
MR.  KELSEY:    Yes. 

MR  LEUBUSCHER:  Before  that,  you  stated  that  we  had  over^ 
production  of  buildings.  Nobody  is  going  to  build  more  if  we  have  an 
over-production  now? 

MR  KELSEY :  They  ought  not  to  but  they  may  try  because  they 
hope  to  get  out  at  the  expense  of  their  neighbors.     If  they  have  land 

268 


that  does  not  pay  they  are  going  to  jump  in.  They  don't  care  what 
happens  to  their  neighbor. 

MR.  LEUBUSCHER:  If  it  did  continue,  what  would  be  the  re- 
sult ;  would  the  result  not  be  what  you  say,  lower  rents  ? 

MR.  KELSEY:  It  will,  ultimately.  Everything  goes  around  in 
a  circle.     It  is  like  unrestricted  competition. 

MR.  LEUBUSCHER:  Do  you  think  that  the  increased  burden 
of  taxes  is  responsible  for  the  lessening  of  rental  values? 

MR.  KELSEY:    Certainly. 

MR  LEUBUSCHER:  Are  you  aware  that,  according  to  the  Tax 
Department,  in  1888  real  estate  paid  87%  of  the  taxes— of  the  budget- 
while  in  1913    it  paid  75%  of  the  budget? 

MR.  KELSEY :  That  might  be  true.  That  is  because  the  budget 
has  gone  up.    There  has  been  no  let-up  on  real  estate  owners. 

TESTIMONY  OF  MR.  CHARLES  T.  ROOT, 

Vice-President,  Business  Men's  Association  to  Untax  Industry. 

MR.  ROOT:  Buildings,  just  as  much  as  machinery  or  merchan- 
dise, involve  business  of  some  kind.  Taxes  are  naturally  repres- 
sive'. I  suppose  that  "no  tax  on  industry"  would  be  the 
strongest  advertisement  that  New  York  could  put  out.  It  fol- 
lows that,  if  we  wish  to  encourage  business  and  industry  in  this 
town  we  should  tax  them  as  little  as  possible.  We  have  a  certain 
amount  of  money  to  raise  but  we  should  get  the  money  elsewhere. 
I  think  that  everybody  will  admit  that  taxes  are  repressive  of  anything 
they  are  put  on.  If  a  community  does  not  want  saloons  it  naturally 
taxes  saloons ;  if  it  wants  to  diminish  the  supply  of  dogs  it  load  s  a  tax 
on  dogs.  If  a  community  wants  less  buildings  or  obsolete  buildings  all 
it  has  to  do  is  to  tax  them  in  accordance  with  their  physical  value.  A 
.  common  way  to  tax  is  according  to  value,  and  it  is  the  logical  way  to 
secure  a  supply  of  old  buildings.  Now,  if  a  town  wants  less  business 
transacted  within  its  limits  it  only  has  to  lay  a  stiff  tax  on  business  to 
drive  away  so  much  of  it  as  can  be  carried  on  where  conditions  are  less 

severe. 

Taking  up  the  question  of  how  far  New  York  is  justified  in  un- 
burdening its  building  and  other  industries,  I  have  this  to  say:  Any 
private  investment,  if  wisely  made,  it  is  expected  will  retr.n  to  the 
investor  in  some  form  of  measurable  value  with  a  profit.  I  think  there 
is  no  public  expenditure  that  is  not  governed  by  exactly  the  same  rule. 
I  don't  want  to  say  that  all  public  money  is  wisely  expended  :  h^^t  th^- 
part  prudently  invested  does  come  back  with  profit  in  measurable  value. 
New  York  City  invests  in  streets,  sidewalks,  sewers,  Hght,  poHce,  and 
education  every  year,  and  every  year  it  comes  back  in  rent  for  the 
land  on  which  the  city  is  located.  That  is  the  way  it  is  done.  A  con- 
tinuous closed  circuit  of  its  vital  fluid  is  necessary  to  any  healthy  or- 
ganism. If  anybody  is  continually  losing  blood,  he  is  going  out  of 
business  entirely,  or  else  must  get  a  transfusion  of  somebody  else's 
blood  to  keep  him  going.  If  a  city  permits  a  large  part  of  the  income 
which  it  gets  very  obviously  from  its  own  investment — if  it  allows  it 
to    go    into    the    hands    of    others     than     into     the    purse     of    the 

269 


. 


\    ' 


I* 


city,  it  breaks  the  circuit  and  it  does  not  come  back  to  where  it  started 
from.  There  must  be  a  transfusion  of  some  other  kind  of  blood,  the 
blood  of  labor,  of  construction,  or  whatever  it  may  be,  to  make  up  the 
deficit.  I  think  it  is  quite  clear,  that,  as  the  average  city  investment 
comes  back  in  the  form  of  ground  rent,  enough  of  it  ought  to  go  back 
into  the  public  treasury  to  replace  the  amount  invested. 

Now,  Mr.  Kelsey  seemed  to  assume  that  we  propose  to  take  the  long 
jump  from  the  proposition  now  before  the  city  to  complete  single  tax, 
which  he  claims  would  take  away  every  cent  of  the  land  and  confiscate 
it,  as  the  opponents  say,  to  the  public  purpose.  I  anticipate  no  such  re- 
sult at  any  time.  I  think  anything  that  would  defeat  private  owner- 
ship in  land  would  be  a  great  mistake  and  a  great  misfortune.  I  think 
it  is  impossible  for  any  community  to  administer  its  land  as  economically 
and  effectively  as  is  done  by  private  owners.  At  present  twenty-five 
to  thirty  per  cent,  of  the  ground  rent  goes  to  the  public  treasury,  and 
the  rest  of  it  stays  in  the  hands  of  those  people  who  have  bought  the 
right  to  collect  it.  Of  course,  the  amount  demanded  for  that  right  is 
what  the  price  of  land  is.  But  that  is  not  land  value.  The  only  value 
that  land  has  is  for  use.    And  that  value  for  use  capitalized  is  the  basis 

of  the  price  of  land. 

It  is  unaccountable  to  me  why  people  should  consider  a  town  rich 
because  of  the  high  price  of  its  land.  I  mean  in  any  community  you 
will  find  men  boasting  that  its  land  is  worth  five  billion  dollars,  there- 
fore, it  is  a  rich  city.  They  don't  seem  to  recognize  that  is  the  bi:(- 
gest  debt  that  the  people  owe.  We  have  five  billions  of  land  prices  owned 
by  200,000  persons.  I  assume  that  if  the  value  is  five  billion  it  is  be- 
cause it  will  earn  5%.  That  means  that  somebody  must  earn  $250,- 
000,000  each  year  to  pay  for  it.  The  rest  of  the  people  swell  up  with 
pride  and  say  it  is  a  fabulously  rich  city ;  it  has  got  so  much  worth  of 
land.  Now  the  acknowledged  debt  of  the  city  is  about  one  billion  oi 
dollars,  but  here  is  a  debt  owed  by  five  million  people  to  200,000.  I  see 
no  reason  why  the  five  million  should  be  proud  of  it. 

On  the  price  of  land  have  been  built  up  two  great  structures,  which, 
in  the  public  interest,  should  be  lowered.  One  is  this  tremendous  card- 
house  of  mortgages,  built  up  on  the  right  to  collect  and  pocket  the 
economic  rent,  and  the  other  is  the  enormous  city  debt  caused  by  the 
ease  of  borrowing  ten  per  cent,  on  this  enormous  price  of  land. 

If  anything  could  bring  down  the  price  of  land  it  seems  to  me  the 
advantages  would  be  very  considerable.  If  it  is  done  gradually  by  trans- 
ferring industrial  taxes  little  by  little,  it  can  be  accomplished  without 
serious  disturbance  of  any  legitimate  business.  It  ought  to  take  twenty- 
five  years  to  go  from  the  present  false  basis  to  the  true  basis,  the  rents 
created  by  the  expenditure  of  the  city's  money.  This  latter  is  the  normal 
plan  of  obtaining  public  revenue. 

The  ground  rent  is  always  more  than  sufficient  for  the  support  of 
the  government.  In  New  York  City,  it  costs  $200,000,000  for  us  to 
run  the  city  and  pay  its  enormous  debt  service;  but  the  ground  rents 
are  very  much  larger,  sufficient  to  pay  this  levy  and  leave  ample  com- 
pensation to  the  land  owners  for  administering  the  stewardship  of  the 
land. 

Moreover,  this  plan  of  obtaining  public  revenue  would  make  for 
greater  symmetry  in  the  development  of  this  city.  I  heard  a  very  strik- 
ing statement  by  a  man  the  other  night.  He  said  that  one-half  of  the 
mileage,  the  lineal  mileage  of  the  streets  of  this  city  goes  by  vacant  land. 

^  270 


I  called  up  the  Department  of  Street  Cleaning  and  found  out  officially 
that  the  mileage  of  the  streets  of  the  three  Boroughs  of  Manhattan, 
Brooklyn  and  The  Bronx  is  1,433  miles.  Now,  one-half  may  be  an 
exaggeration,  but  suppose  it  is  approximately  true,  then  the  city  has 
built,  and  must  maintain  at  the  expense  of  the  people,  700  miles  of 
streets,  which  are  not  yet  needed.  That  enormous  gridiron  of  streets 
is  unnecessary.  Think  of  our  having  to  maintain  this  enormous  mileage 
of  streets  and  roads  in  order  to  have  people  pass  land  they  cannot  buy. 
Think  of  the  waste  of  time  and  money  by  the  people  who  must  travel 
to  and  from  their  work  over  700  miles  of  unused,  unnecessary  streets 
which  lead  past  the  vacant  lands.  Think  of  the  saving  of  time,  strength 
and  cash,  if  people  lived  within  walking  distance  or  a  short  ride  of 
their  work  instead  of  five  or  ten  miles  away  in  order  to  find  land  within 
the  limit  of  their  purse.  All  of  these  things  would  have  resulted  had 
New  York  grown  up  under  the  normal  revenue  system. 

PROFESSOR  SELIGMAN:  As  regards  your  last  point,  about 
a  compact  city,  it  has  been  brought  out  before  us  by  some  that  one  of 
the  objections  to  the  scheme  of  untaxing  buildings  is  that  it  would 
cause  too  intensive  a  use  of  the  land;  do  away  with  the  gardens  of  the 
small  man,  and  cause  skyscrapers  and  immense  buildings  all  over  the 
slums.  What  is  your  opinion  as  to  the  tendency  of  this  untaxing  of  build- 
ings to  bring  about  that  unsocial  result? 

MR.  ROOT:  It  does  not  seem  to  me  likely  to  bring  about  that 
result.  If  it  had  the  desired  effect  of  reducing  the  cost  of  land,  and  if, 
therefore,  instead  of  having  to  pay  $500  per  front  foot  for  the  land, 
which,  perhaps,  he  could  not  afford  to  put  a  garden  on,  the  price  of  it 
was  reduced  by  a  different  form  of  raising  revenue,  to  $75  a  front  foot, 
it  would  not  tend  necessarily  to  restriction  of  the  land  to  be  used ;  rather 
the  reverse.  In  speaking  of  a  compact  city,  I  do  not,  of  course,  advo- 
cate a  solidly  built-up  city.  We  must  have  a  system  of  parks.  I  think 
that  our  present  park  system  is  damaged  by  the  fact  that  there  is  so 
much  temporarily  vacant  land  that  the  needs  for  breathing-spaces  are 
not  sufficiently  foreseen  and  provided  for. 

PROFESSOR  SELIGMAN:  Your  interesting  rejoinder  then, 
rests  on  the  assumption  that  the  selling  price  of  land  will  be  considerably 
reduced?  I  want  your  opinion  on  that  point  because  it  has  been  rather 
emphatically  proclaimed  to  us  by  some  of  the  other  witnesses  that  the 
result  would  not  be  to  reduce  the  selling  value  of  the  land.  You  think  the 
result  of  this  scheme  would  be  throughout  the  city  to  reduce  the  selling 
value  of  the  land? 

MR.  ROOT:     That  would  be  the  tendency. 

PROFESSOR  SELIGMAN:  I  understand  you  to  say  that  you 
believe  that  the  working  out  of  the  scheme  of  untaxing  buildings  ought 
to  take  about  25  years? 

MR.  ROOT:  It  ought  to  take  that,  at  least.  But  I  think  that  if 
we  took  off  only  half  the  tax  on  buildings  it  ought  not  to  take  such  a 
length  of  time  as  that. 

PROFESSOR  SELIGMAN:  You  would  not  be  in  favor  of  im- 
mediate total  exemption  of  all  buildings  from  taxation? 

MR.  ROOT :  I  think  that  the  present  time  would  be  an  unfavorable 
one  to  make  such  a  severe  change. 

271 


m 


TESTIMONY  OF  MR.  ADOLPH  BLOCH, 

Member  of  the  Board  of  Counsel  of  the  United  Real  Estate  Owners^^ 
Association;  Member  of  the  Advisory  Council  of 

Real  Estate  Interests. 

MR.  BLOCH:  My  experience  of  twenty  years  has  brought  me 
into  contact  with  a  great  many  people  of  the  middle  class,  who,  by  dint 
of  hard  work  and  industry,  have  accumulated  something  to  invest  and 
have  invested  that  in  real  estate.     I  have  a  great  deal  of  concern  for 

those  people. 

The  profits  from  ownership  of  real  estate  have  been  very  much 
exaggerated,  both  as  to  income  and  increment.  I  am  most  familiar 
with  houses  of  the  smaller  type,  the  five-story  double-flat  house  in  York- 
ville  and  the  Bronx,  averaging  $25,000  in  value,  upon  which  there  may 
be  a  savings  bank  mortgage  of  two-thirds  of  that  amount.  The  owner 
of  that  house  really  owns  one-third  and  the  other  two-thirds  is  owned 
by  the  mortgagee.  The  income  from  the  ordinary,  well-rented  house, 
to  which  the  owner  gives  a  great  deal  of  personal  attention — ofttimes 
acting  in  the  capacity  of  housekeeper  or  janitor— is  not  much  more  than 
the  income  he  would  have  received  if  he  deposited  his  money  in  the 
ordinary  savings  bank.  The  difference  is  scarcely  more  than  one  or 
two  per  cent.  There  are,  of  course,  cases  where  it  is  slightly  higher. 
There  are  more  cases  where  it  is  less.  That  one,  two  or  three  per  cent. 
is  a  mere  pittance  for  the  amount  of  work,  labor  and  time  expended  on 
the  house,  the  risk  and  worry  of  being  at  some  time  deprived  of  the 
savings  of  a  lifetime  by  the  enactment  of  such  laws  as  that  riu.v  uii^iCr 
consideration  by  your  Committee. 

There  seems  to  be  no  question  that  the  proponents  of  this  measure 
are  on  the  road  to  the  pure  single  tax  theory.  I  can  scarcely  repress  a 
feehng  of  indignation  when  I  hear  the  statement  made  at  this  hearing 
about  the  city  appropriating  the  land  and  administering  it  itself,  or 
about  some  measure  that  is  ostensibly  a  tax  measure  but  is  not  really 
intended  as  an  income  producer  at  all.  Those  in  favor  of  the  plan 
deliberately  say,  "Let  us  adopt  some  measure  for  the  benefit  of  the 
whole  community,  regardless  of  property  rights.  Let  us  depress  values, 
make  land  cheap,  and  it  will  be  freer  and  all  people  will  ))e  able  to  use 
it  freely."  I  speak  for  myself  as  well  as  others,  as  nearly  all  of  my 
earnings  are  invested  in  real  estate.  I  am  talking  about  real  estate 
of  which  I  am  proud.  The  real  estate  that  I  own  is  managed  so  that 
the  tenants  may  live  decently,  properly  and  respectably;  I  can  con- 
scientiously point  with  pride  to  the  houses.  I  am  talking  about  the 
conservative  man,  who,  when  he  bought  a  house,  transferred  his  sav- 
ings account  for  a  deed  to  that  property.  All  that  represents  labor,  and 
tW  hardest  kind  of  sacrifice  and  work.  So  that,  therefore,  I  say  that  is 
my  property.  I  paid  for  it.  I  have  earned  the  money  in  order  to  buy 
it.  I  have  a  right  to  rely  upon  the  fact  that  I  will  be  protected  in  the 
ownership  of  that  property.  I  cannot  bear  to  think  that  anybody  would 
confiscate  that  which  I  own,  because  that  would  be  spoliation  under  the 

guise  of  law.  .  1      *      -u 

I  think  it  will  be  conceded  that  imposing  a  burden  upon  land  will 
tend  to  depress  the  value  of  land.  If  you  artificially  depress  the  value 
of  that  land  and  make  it  cheaper,  you  are  depriving  the  man  that  I 
represent  and  me  of  that  which  I  have  honestly  acquired.  You  have 
taken  it  away  from  us.    I  have  invested,  say,  $10,000  in  real  estate.    You 

272 


arbitrarily  make  it  worth  only  $6,000  or  $7,000.  If  it  is  going  to  be  re- 
duced to  that  extent,  you  are  wiping  out  the  equity  of  the  owner,  who 
had  but  one-third.  You  also  wipe  out  a  substantial  part  of  the  mort- 
gagee's interest.  If  the  deliberate  purpose  is  to  make  that  land  cheaper, 
you  take  away  something  that  belongs  to  somebody  and  that  means 
confiscation.  You  do  something  which,  to  my  mind,  is  an  immoral 
thing.  If  you  say  that  the  public  need  is  superior  to  the  need  of  the 
individual,  then  you  may  as  well  say,  we  will  take  your  savings  in 
the  savings  bank  because  the  city's  needs  are  such  that  we  must  have 
more  money.  It  is  absolutely  unjustifiable,  absolutely  unwarranted,  and 
an  immoral  proposition. 

One  question  you  are  considering  is:  Does  it  lead  to  intensive 
use  of  property?  Yes,  of  course,  it  does.  I  have  in  mind  a  seven-story 
apartment  house  on  Park  Avenue  in  the  eighties.  It  is  on  a  comer. 
The  building  is  about  ten  years  old.  It  has  the  improvements  of  a 
house  of  that  age.  The  land  is  assessed  at  $265,000,  the  land  and  build- 
ing together  for  $365,000,  so  that  means  $100,000  is  the  value  of  the 
building  and  $265,000  is  the  value  of  the  land.  Now,  immediately  ad- 
jacent to  that  building  is  another  building  similarly  situated.  It  is 
on  a  slightly  better  street.  The  land  is  assessed  for  $300,000.  It  is 
built  on.  It  has  the  highest  building  of  that  type  that  is  permitted 
to  be  built — 17  stories  high.  Now,  that  is  taking  advantage  of  every 
inch  of  building  that  is  permitted  by  law  upon  that  plot  of  land. 
There  you  have  the  intensive  use  of  that  land  for  apartment  house  pur- 
poses. The  land  and  building  are  assessed  at  $1,000,000.  The  building 
is  assessed  at  $700,000  and  the  land  for  $300,000.  The  lady  that  owns 
the  first  house  thought  she  was  going  to  get  an  income  for  the  rest  of 
her  life.  The  savings  and  earnings  of  her  husband  have  been  invested 
in  that  property.  I  do  not  know  what  the  equity  is.  I  imagine  that 
it  is  not  more  than  $100,000.  She  thought,  I  suppose,  that  the  income 
on  $100,000  ought  to  be  fairly  sufficient  for  her  to  live  decently  and  re- 
spectably. What  is  the  effect  of  the  building  of  the  adjoining  house? 
What  would  the  effect  be  if  you  untaxed  buildings?  She  discovers  that 
the  taxes  are  gradually  going  up  so  high  on  Park  Avenue  that  the  in- 
terest or  income  from  that  property  is  very  much  diminished.  For 
seven  years  the  rent  has  not  gone  up.  Now,  suppose  you  had  a  law 
such  as  you  propose  to  enact,  wherein  you  provide  for  the  ultimate  un- 
taxing of  that  building,  what  would  the  effect  be  on  a  building  worth 
$100,000?  It  means  that  the  burden  will  be  placed  upon  the  land.  It 
means  that  the  taxes  will  be  still  higher.  It  means  that  the 
next  house  will  be  taxed  very  much  less.  There  you  have 
the  proportion  of  seven  to  three — a  building  worth  $700,000  on 
land  worth  $300,000.  The  first  house  cannot  be  profitably  maintained 
as  it  is  to-day.  What  will  be  experienced  after  you  put  more  taxes  on 
that  land?  Now,  if  she  pulls  down  that  house  and  erects  a  building 
of  the  same  type  as  the  one  adjoining,  she  would  first  lose  the  val-te 
of  the  building  altogether,  that  is,  the  $100,000.  The  land  and  building 
would  be  depreciated  to  $260,000,  or  so,  and  her  equity  would  be  wiped 
out.  That  does  not  take  into  consideration  the  depreciation  of  the 
land  itself.    It  would  involve  the  loss  of  all  the  money  she  had  invested. 

Another  point:  Does  it  lead  to  congestion?  Of  course,  it  does. 
The  first  building  that  went  up  on  Park  Avenue  paid  very  well.  It  was 
nigh  and  modern.  The  land  was  cheap  and  rental  conditions  were 
good.     The  next  house  that  went  up  was  profitable  and  paid  a  fair 

273 


ji 


I! 


return.  All  along  Park  Avenue  you  will  find  block  after  block  from 
Fiftieth  Street  up  to  the  nineties  where  they  are  putting  up  large  build- 
ings. Soon  you  will  get  to  a  point  where  over-production  exists.  There 
is  over-production  there,  to  my  mind,  already.  Soon  the  mortgage 
market  will  tighten  for  loans  on  Park  Avenue  apartments.  We  have 
had  precedent  for  that.  A  few  years  ago  the  heads  of  londin^'^  institu- 
tions said  they  would  not  lend  another  dollar  on  any  loft  building  in 
the  city.  You  are  in  the  hands  of  the  loan  institutions.  When  they  say 
stop,  they  stop,  and  all  avenues  are  closed.  They  merely  will  not  lend 
you  any  more  money.    That  is  all  there  is  to  it. 

In  talking  about  the  city  debt  and  about  the  constitutional  limit 
of  ten  per  cent,  of  the  assessed  valuation  of  property,  you  must  bear 
in  mind  that  real  estate  has  borne  and  paid  nearly  87  per  cent,  of  the 
entire  sum  collected  in  taxes  by  this  city.  In  my  judgment,  real  estate 
is  assessed  at  its  full  value  and  a  little  bit  more.  The  debt  margin  of 
the  city  is  very  small.  I  think  the  Comptroller  recently  estimated  it  at 
about  $11,000,000.  It  may  be  twice  or  three  times  that,  but  it  is  not  five 
times  that.  The  city  owes  a  thousand  million  dollars.  The  assessed 
valuation  is  approximately  ten  billion  dollars.  You  arc  dangerously 
near  the  point  of  impairing  the  obligation  of  the  city's  bonds.  If  you 
depress  the  value  of  the  real  estate,  it  means  that  the  bonded  indebted- 
ness of  the  city  will  be  impaired  and  you  will  have  exceeded  the  con- 
stitutional limits. 

I  do  not  believe  that  there  are  many  cases  where  people  deliberately 
retain  or  refuse  to  sell  their  land  simply  in  the  hope  of  getting  very 
large  returns  by  reason  of  any  unearned  increment.  There  may  be 
some  rare  instances  of  it.  If  land  gets  to  a  point  where  the  owner  can 
see  a  fair  profit  he  generally  wants  to  sell.  If  he  does  not  sell  then,  he 
may  lose  his  chance  and  never  get  it  again.  That  experience  has  been 
had  by  people  on  Fifth  Avenue  south  of  Thirty-fourth  Street,  where 
there  has  been  a  great  depreciation  in  value. 

I  don't  know  personally  of  any  great  increase  in   value  of  land. 
I   rarely  hear  of   it  except  in   auctioneers'   advertisements.     I   bought 
some  land  at  an  auction  which  was  widely  advertised — the  Joel  Wolff 
Estate  at  Bronx  Park  East,  near  White  Plains  Avenue  and  20Tst  Street. 
I  was  told  and  the  advertisement  stated  that  that  boulevard  was  going 
to  be  the  Fifth  Avenue  of  The  Bronx.     I  went  out  to  the  lots  that  I 
had   picked   out  on   the   map   and   found   that  they   were   opposite   the 
entrance  to  Bronx  Park.     I  referred  to  the  advertisement,  and  I  found 
that  was  about  the    same    location    relatively    as    the    Plaza    Hotel. 
(Laughter).      That   piece   of  property   nearly   proved   my   undoing.      I 
paid  $1,100  for  the  corner  lot  and  $900  for  the  inside  lots.     I  bought 
four  and  I  paid  about  $3,500  for  them.     According  to  the  terms  of  sale 
I  was  offered  an  opportunity  to  pay  one-third  in  cash  and  the  balance 
on  mortgage.     I  did  that.     I  thought  in  three  years  the  land  would  be 
worth  more.     I  had  to  pay  taxes  on  that  property  every  year,  and  also 
tremendous  assessments.     I  had  to  pay  $500  on  property  worth  $3,000 
for  the  laying  and  paving  of  a  street.    There  are  no  houses  there.  Some 
of  the  flagging  of  the  pavement  has  been  taken  up  and  is  now  used  for 
neighborhood  door  steps.     At  the  end  of  three  years  the  mortgage  be- 
came due.     Fortunately  I  had  the  money  and  paid  it  off.     I  am  qiiite 
sure  I  cannot  get  now  what  I  paid  for  the  property.     I  do  not  think 
I  will  ever  get  what  I  paid  for  it  originally,  figuring  taxes  and  assess- 
ments and  compound  interest  on  the  money.     If  I  had  put  my  money 

274 


m  a  savmgs  bank  I  would  be  much  better  off.  But,  how  about  the  poor 
purchasers  who  did  not  have  the  experience  I  had,  or  that  I  thought  I 
had,  m  real  estate  matters?  How  about  the  workingmen  who  were 
lured  into  buying  this  land?  They  brought  their  savings  bank  book 
with  them  and  handed  it  over,  and  that  is  the  value  of  the  land.  It  is 
not  what  the  community  made  it,  but  it  represents  that  man's  earn- 
ings. To  me  that  is  his  labor.  When  the  three  years  were  over  I  do 
not  know  what  happened  to  these  purchasers  but  I  think  a  great  many 
of  them  lost  their  property. 

PROFESSOR  SELIGMAN:  As  a  matter  of  fact,  do  the  increases 
in  assessed  land  values  in  the  city  represent  profits  to  the  land  owners? 

MR.  BLOCK:     No;  they  do  not. 

I  have  a  friend  who  lives  on  One  Hundred  and  Fifty-third  Street, 
near  Riverside  Drive.  He  has  lived  there  for  many  years.  He  told  me* 
that  one  must  be  almost  a  millionaire  to  keep  a  home  there;  that  his 
taxes  have  gone  up  enormously,  and  he  has  to  keep  on  paying  and  pay- 
ing more  all  the  time.  Now,  that  does  not  represent  any  unearned  in- 
crement. He  has  been  adding  money  all  the  time.  He  could  not  sell 
now  if  he  wanted  to.    He  is  losing  money  on  it. 

MR.  LEUBUSCHER:  Mr.  Bloch,  do  you  believe  in  an  excise 
tax? 

MR.  BLOCH:    Yes,  I  do. 

MR.  LEUBUSCHER :  Is  that  a  tax  imposed  primarily  for  the  pur- 
pose of  revenue  or  for  the  purpose  of  regulation? 

MR.  BLOCH :  I  think  both.  I  think  it  is  a  good  means  of  raising 
revenue,  but  it  regulates  at  the  same  time. 

MR.  LEUBUSCHER:  If  you  believe,  therefore,  in  that  sort  of  a 
tax  for  both  purposes,  why  do  you  object  to  a  tax  imposed  as  this  is 
proposed  to  be  imposed  for  both  purposes? 

MR.  BLOCH:  Why,  I  would  say  that  when  you  talk  about  a 
tax  measure  you  have  in  mind  the  revenue  produced  by  it.  When  you 
refer  to  a  liquor  tax  you  are  considering  a  different  problem.  When 
you  talk  about  deliberately  depressing  values  and  depriving  me  of  that 
which  I  own  and  have  honestly  acquired  under  existing  conditions  you 
talk  of  robbing  me. 

MR.  LEUBUSCHER:  Do  you  think  that  liquor  store  keepers 
who  pay  a  larger  tax  now  under  the  existing  conditions  of  the  liquor 
tax  than  they  did  last  year,  are  being  robbed  by  an  increase  of  that 
liquor  tax? 

MR.  BLOCH:  I  think  that  is  a  relative  term.  I  would  not  say 
they  are  being  robbed.  I  think  the  imposition  of  such  a  tax  may  be 
a  fair  and  reasonable  tax,  considering  the  commodity  sold,  hut  when 
you  go  beyond  the  province  of  reasonableness  you  go  towards  con- 
fiscation. 

MR.  LEUBUSCHER:  Who  is  to  be  the  judge  of  the  reasonable- 
ness?   You,  Mr.  Bloch? 

MR.  BLOCH:  We  will  leave  that  to  the  community. 
MR.  LEUBUSCHER:  How  about  this  proposition? 
MR.  BLOCH:     I  only  say,  leave  it  to  fair-minded  men. 

275 


"1! 

I'  I, 


h 

u 


)•■•■■  : 


!:i 


MR.  LEUBUSCHER:     Who  is  to  select  the  fair-minded,  honest 

MR  BLOCK:  Any  proposition  like  this  can  be  determined  by  any 
fair-minded  man,  capable  of  understanding  the  subject. 

MR.  LEUBUSCHER:     You  have  no  objection  to  a  referendum 

MR  BLOCK:  Yes,  I  have.  It  took  me  five  years  to  understand 
something  about  this  complex  subject.  The  question  should  not  be  re- 
ferred  to  people  who  have  no  opportunity  for  mvestigation. 

MR.  LEUBUSCHER :  This  poor  widow.  What  did  you  say  the 
assessed  value  of  her  land  is? 

MR.  BLOCK:     $265,000. 

MR.  LEUBUSCHER:    What  was  it  assessed  at  ten  years  ago? 

MR.  BLOCK :     I  do  not  know. 

MR.  LEUBUSCHER:    Probably  it  was  $100,000,  would  you  say? 

MR.  BLOCK :     I  don't  know ;  I  would  be  speculating. 

MR.  LEUBUSCHER:  Is  it  not  a  fact  that  that  section  of  Park 
Avenue  has  increased  very  largely? 

MR  BLOCK:  There  has  been  a  large  increase.  I  do  not  be- 
lieve there  has  been  an  increase  of  $100,000  in  that  one  place. 

MR  LEUBUSCHER:  If  this  poor  widow  sold  out  now  she 
might  get  not  $100,000,  but  perhaps  about  $90,000,  or  even  $50,000? 

MR  BLOCK :  If  she  sells  now,  she  would  probably  be  wiped  out. 
The  character  of  that  building  is  obsolete  compared  with  the  buildings 
surrounding  it. 

MR.  LEUBUSCHER:     That  happens   under  the  present  taxing 

system  ? 

MR.  BLOCK:    Yes. 

MR.  LEUBUSCHER:  You  cannot  blame  the  proposed  tax  sys- 
tem for  that  building  becoming  obsolete. 

MR.  BLOCK:  I  think  things  are  bad  enough  without  making 
them  much  worse. 

MR.  SHIPLEY:  Do  you  think  that  the  general  well-being  oi 
the  real  estate  situation  is  necessary  to  the  welfare  of  the  city  ? 

MR.  BLOCK:    I  think  so. 

MR  SHIPLEY:  Do  you  regard  the  lending  of  money  and  the 
placing  of  mortgages  as  necessary  to  the  well-being  of  real  estate? 

MR.  BLOCK :  I  think,  under  conditions  as  they  exist  to-day,  it  is 
absolutely  essential. 

MR  SHIPLEY:  Do  I  understand  you  to  say  that  there  is  a 
money-lending  ring  in  New  York  City,  which  could  issue  an  edict  under 
which  money  would  not  be  loaned  in  a  given  section? 

MR  BLOCK:  I  think  conditions  are  such  that  appraisers  in 
New  York  agree  as  to  what  should  be  done  and  what  should  not  be 

done 

MR.  SHIPLEY:     That  is  tantamount  to  a  mortgage  trust? 

MR.  BLOCK :  I  am  perfectly  willing  to  call  it  that,  for  that  is 
what  it  amounts  to  in  the  end.     It  is  a  ring.    I  do  not  want  to  imply 

276 


anything  improper.     It  is  a  combination  which  is  cohesive.     It  sticks 
together. 

DR.  WILCOX:  You  spoke  of  the  fact  that  there  had  been  a  great 
change  in  values  in  different  parts  of  the  city,  and  you  look  with 
abhorrence  upon  any  individual  who  would  advocate  a  scheme  which 
would,  with  knowledge  of  the  individual  in  advance,  result  in  a  re- 
shifting  of  values.  Do  you  think  that  the  subway  system  which  is  now 
under  construction  will  result  in  a  destruction  of  a  great  many  values 
in  different  portions  of  the  city  and  the  transfer  of  such  values  to  other 
portions  ? 

MR.  BLOCK :  The  effect  of  so  extensive  a  scheme  of  subway 
construction  is  to  bring  about  the  destruction  of  values  in  Manhattan 
in  a  great  many  cases. 

DR.  WILCOX:  Do  you  look  with  horror  upon  the  individual  who 
advocates  that  plan  or  that  scheme? 

MR.  BLOCH:  Not  with  horror;  but  I  think  it  is  unwise  in  mak- 
ing it  as  extensive  as  it  is.  We  lack  transportation  facilities  in  the 
Borough  of  Manhattan,  yet  we  are  going  to  get  them  in  abundance  in 
Queens,  Pelham  Manor,  and  Richmond. 


TESTIMONY  OF  FREDERICK  L.  CRANFORD, 
Vice-President,  The  Business  Men's  Association  to  Untax   Industry. 

MR.  CRANFORD :  Without  regard  to  the  ethical  or  moral  stand- 
point, I  would  like  to  make  an  argument  urging  you  to  make  a  report 
favoring  the  gradual  reduction  of  the  tax  rate  on  buildings  for  practical 
and  business  reasons. 

If  you  will  attend  the  public  hearings  on  the  important  questions 
affecting  the  vital  interests  of  New  York  at  the  Board  of  Estimate,  you 
will  find  those  meetings  dominated  by  a  very  intelligent  group  of  real 
estate  men,  and  if  you  will  listen  to  their  talk,  you  will  be  convinced 
that  the  growth  of  New  York  City  is  dependent  upon  their  efforts.  It 
is  not  an  exaggeration  to  say  that  their  influence  politically  is  more 
potent  at  the  present  time  than  the  commercial  and  business  interests 
of  this  community.    They  are  convinced  that  they  create  the  land  values. 

The  foundation  upon  which  rests  the  growth  of  New  York  City  con- 
sists of,  first,  the  unrivalled  facilities  of  the  port  of  New  York  as  the 
principal  gate  of  commerce  of  the  United  States,  and,  second,  the  growth 
and  development  of  the  manufacturing  and  commercial  interests  which 
find  in  this  community  a  favorable  economic  opportunity.  The  factors 
looking  toward  the  improvement  of  the  facilities  of  the  port  of  New 
York  at  the  present  time  are  the  construction  of  the  Panama  Canal, 
the  Erie  Canal  and  the  dock  facilities  of  the  city. 

You  must  agree  that  the  commercial  and  manufacturing  industries 
of  Greater  New  York  create  the  values  of  real  estate  and  afterwards 
maintain  those  values.  Your  Committee  has  an  opportunity  to  pro- 
mote this  interest,  or  you  have  an  opportunity  to  promote  the  growth 
of  values  independent  of  and  at  the  expense  of  those  indus- 
tries. There  is  only  one  alternative,  as  I  see  it.  You  must  either 
increase  the  tax  on  land,  or  advocate  the  placing  of  an  increased  tax  on 
the  industries  of  this  community,  because  the  tax  bill  is  going  to  be 
greater.    An  increasing  tax  upon  land  and  a  decreasing  tax  upon  per- 

277 


) 


I 


-Hi 


1 


III 


sonal  property  and  buildings  would  tend  to  diminish  the  fixed  charges 
of  business  enterprises  and  would  show  an  appreciation  by  the  govern- 
ment of  the  city  of  the  fact  that  a  manufacturing  establishment  giving 
regular  employment  is  a  valuable  asset  to  a  community.  It  would 
tend  to  stop  the  continued  movement  out  of  New  York  City  of  manu- 
facturing plants,  particularly  those  which  need  a  large  area  of  land  for 
their  successful  operation,  and  it  would  tend  to  make  it  more  easy  for 
them  to  extend  the  area  of  their  plant.  It  would  also  tend  to  stop  the 
movement  to  northern  New  Jersey  of  manufacturing  establishments 
formerly  located  in  New  York  City — in  response  to  the  inducement 
those  communities  offer  of  long  periods  of  tax  rebates  and  of  cheap 
locations. 

It  is  a  fair  statement  to  make  that,  in  building  the  public  works  of 
New  York,  in  developing  the  business  opportunities,  and  in  construct- 
ing the  necessary  facilities  of  a  great  city,  you  thereby  create  land 
values  more  than  equivalent  to  their  cost ;  and  this  community  must, 
in  the  future,  take  of  these  values  a  revenue  sufficient  to  maintain  the 
commercial  and  manufacturing  position  of  the  city  and  to  encourage 
its  growth.  No  message,  as  I  take  it,  is  more  plainly  written  on  the 
wall  as  we  look  at  the  revolution  now  in  progress  in  Europe  than  that 
we  must  promote  our  industrial  efficiency.  It  is  inefficiency  and  waste- 
fulness to  permit  industrial  opportunities  of  the  city  to  be  capitalized 
into  land  values  for  the  benefit  and  enjoyment  of  those  who  are  not  en- 
gaged in  production. 

PROFESSOR  SELIGM AN :  I  take  it  that  your  argument  means 
this :  We  should  be  very  careful  to  look  after  the  business  interests  of 
the  community  in  this  matter  rather  than  the  real  estate  interests,  and 
that  this  contemplated  change  will  be  a  good  thing,  first,  because  it  will 
increase  the  business  of  building  houses;  and,  second,  because  it  will 
decrease  the  rentals  of  business  premises.  Am  I  correct  in  my  state- 
ment? 

MR.  CRANFORD :  My  argument,  as  I  tried  to  give  it,  was  to  urge 
that  you  report  in  favor  of  decreasing  taxation  on  the  personal  prop- 
erty engaged  in  business.  When  I  talk  about  that,  I  mean  buildings, 
machinery,  etc.  The  building  operations  of  the  city  are  entirely  de- 
pendent, as  I  understand  it,  upon,  first,  providing  for  a  man  the  means 
of  making  a  living  in  some  useful  industry ;  after  he  has  got  his  liv- 
ing, it  is  time  enough  to  look  after  building  a  home  for  him. 

TESTIMONY  OF  MR.  LOUIS  V.  BRIGHT, 

President,  Lawyers'  Title  and  Trust  Company. 

PROFESSOR  SELIGMAN :    Is  it  your  opinion,  Mr.  Bright,  that 

the  speculator's  activities  in  land  in  the  City  of  New  York  have  been  a 
good  thing  or  a  bad  thing? 

MR.  BRIGHT:  On  the  whole  I  don't  think  speculation  has  been 
detrimental.  It  has  led  to  the  building  up  of  sections  which  would  not 
have  been  built  up  otherwise. 

PROFESSOR  SELIGMAN :  Has  it  led  to  the  withholding  of  land 
on  a  large  scale  out  of  use  and  thus  decreased  the  supply  of  houses  and 
increased  the  rentals  to  the  people  who  live  in  the  houses  we  now  have? 

278 


MR.  BRIGHT:  I  do  not  think  it  has.  As  far  as  I  can  remember 
land  has  been  freely  dealt  in. 

,  PROFESSOR  SELIGMAN:  Do  you  think  that  the  untaxing  of 
buildmgs  would  normally  lead  to  an  increase  in  the  quantity  of  build- 
mgs  offered? 

MR.  BRIGHT:     I  think  that  would  be  the  tendency.     Of  course 
one  must  answer  that  question  within  limitations ;  that  is,  the  number 
would  mcrease  to  the  extent  that  you  could  get  capital  to  go  into  such 
improvements. 

PROFESSOR  SELIGMAN:  When  we  come  to  the  new  equili- 
brium and  have  a  larger  supply  of  buildings,  do  you  think  rents  would 
be  lower  than  to-day?     If  so,  to  what  extent? 

MR.  BRIGHT:  This  is  a  very  difficult  question  to  answer.  If 
capital  could  be  obtained,  improvements  would  increase  and  rents  might 
remain  stationary  or  decline  slightly.  If  capital  could  not  be  obtained 
rents  would  not  go  down  but  would  probably  rise. 

PROFESSSOR  SELIGMAN :  Why  do  you  think  that  capital  could 
not  be  obtained? 

MR.  BRIGHT:  I  think  that  a  change  in  the  tax  methods  would 
tnake  real  estate  mortgages  less  inviting  for  investment  purposes  I 
think  the  natural  tendency  of  capital  would  be  to  avoid  these  invest- 
ments if  equities  could  be  destroyed  by  the  taking  away  by  the  state  of 
the  value  of  real  estate  outside  of  the  use  value. 

PROFESSOR  SELIGMAN:     Do  you  think  that  these  alleged  ad- 
vantages of  the  system,  such  as  lower  rents,  more  spacious  buildings 
etc.,  would  be  attended  by  this  friction  to  which  you  refer? 

MR.  BRIGHT:  That  is  my  judgment.  I  also  think  the  so-called 
advantages  of  the  change  in  method  are  exaggerated. 

PROFESSOR  SELIGMAN :  On  the  other  hand,  would  you  main- 
tain that  the  fears  of  real  estate  owners  and  of  the  mortgage  holders 
are  also  exaggerated?  ^ 

MR.  BRIGHT:    What  exactly  do  you  mean  by  exaggerated? 

PROFESSOR  SELIGMAN:    I  mean  this:    You  have  just  stated 
that,  in  your  opmion,  the  anticipated  benefits  of  the  scheme  are  exag- 
gerated. ^^«=» 

MR.  BRIGHT:    Yes. 

PROFESSOR  SELIGMAN :    Now,  I  ask  vou  Mr  RnVh.      y.  .u 
you  think  that  the  anticipated  injuries  from  th'T  sVsJem  ^r^^^^^ 
prated.     By  injuries  I  mean,  fir^t,  a  possible  paK^e  to  the'cauf^^^ 
in  of  mortgages ;  secondly,  a  decrease  in  land  values  and  th!  .        ^ 
quent  concentration   of  property;   and  third,   a  more   intens  ve   usT'of 

?oUr?Vet;to.""''  """  ^"^^"  ^°''^^^*'^"-  '^^-^  arrtL^thre" 
happYn^'  BRIGHT:    I  am  inclined  to  think  that  those  results  would 

PROFESSOR  SELIGMAN:    Suppose  you  take  thp«, 
and  give  us  a  fuller  opinion.  ^^        ^      *^^^  ^^^"^  "P  '"  turn, 

279 


MR.  BRIGHT:  I  think  that  the  tendency  would  be  to  more  in- 
tensive improvement  of  land.  I  think  there  is  no  question  about  that. 
I  think  that  there  would  be  a  very  large  calHng  in  of  mortgages  Under 
the  conditions,  I  do  not  know  whether  they  could  be  replaced.  The 
equities  would  be  seriously  impaired,  if  not  wiped  out.  Now,  as  to  the 
decrease  of  land  values,  the  effect  would  be  very  serious  in  the  case  of 
those  who  had  invested  money  in  small  properties. 

PROFESSOR  SELIGMAN :  In  case  this  new  scheme  was  to  be 
adopted  would  there  be,  in  your  opinion,  a  decrease  in  the  selling  value 
of  real  estate? 

MR.  BRIGHT:     I  think  there  would  be. 

PROFESSOR  SELIGMAN :  What  do  you  say  about  such  a  prop- 
osition as  this :  To  leave  the  taxes  just  as  they  are  now  on  buildings 
and  lands,  but  to  provide  that  any  future  additional  revenue  that  might 
be  needed  should  be  raised  in  part  at  all  events,  if  that  were  sufficient, 
by  taking  a  small  percentage  of  the  increase  of  value  of  the  land? 

MR  BRIGHT:  I  think  that  is  a  much  fairer  scheme.  It  is  open 
to  some  objection,  principally  this:  Who  is  going  to  make  good  the 
loss  on  the  land  when  the  land  depreciates? 

PROFESSOR  SELIGMAN:  Do  you  believe  that  the  so-called 
increase  in  land  values,  as  a  whole,  represent  nothing  more  than  the 
purchase  price  plus  compound  interest  thereon,  plus  taxes  and  assess- 
ments^ Or  would  you  say  that  there  has  been  over  and  above  that 
amount  a  distinct  profit  to  the  holder  of  the  land  in  the  course  of  the 
last  generation  or  two? 

MR.  BRIGHT:  I  think  there  is  some  profit,  but  I  think  the 
amount  is  grossly  exaggerated. 

PROFESSOR  SELIGMAN :  Do  you  think  that  it  is  entirely  unfair 
to  give  figures  of  increases  in  land  values  as  representing  a  profit  to  land 
owners? 

MR.  BRIGHT:     That  is  not  just. 

DR.  WILCOX :  What  is  congestion  and  do  you  think  that  conges- 
tion would  be  increased? 

MR.  BRIGHT:  I  think  the  effect  if  you  untax  buildings  would 
mean  the  more  intensive  development  and  occupation  of  the  land.  The 
tendency  now  is  for  a  builder  to  put  up  the  largest  building  he  can, 
provided  capital  can  be  obtained  to  erect  the  structure.  This  tendency 
if  you  untax  buildings  would  be  increased,  because  it  would  create  a 
form  of  wealth  from  which  revenue  would  be  derived  and  which  would 
not  be  subject  to  taxes. 

DR.  WILCOX:  Your  idea  is  that  it  would  create  more  buildings 
on  the  land? 


MR.  BRIGHT: 

DR.  WILCOX: 

MR.  BRIGHT: 

DR.  WILCOX: 
ness  or  population? 


More  in  height. 

There  would  be  more  of  them? 
Possibly  more  of  them. 
That   would   not   result   in   congestion   of   busi- 

280 


MR.  BRIGHT:     Not  necessarily. 

DR.  WILCOX:     It  is  a  congestion  of  improvements? 
MR.  BRIGHT:     Yes.     We  are  keeping  down  the  height  of  build- 
ings now  for  reasons  of  health  and  safety. 

DR.  WILCOX:  Would  not  the  natural  eflFect  of  congestion  of 
improvements  be  the  lessening  of  the  congestion  of  population  and 
business  which  are  now  considered  great  social  evils  and  have  been  so 
for  generations  in  New  York? 

MR.  BRIGHT:    I  do  not  think  you  would  get  that. 

DR.  WILCOX :  How  could  you  otherwise  if  you  have  more 
buildings  and  have  the  same  number  of  people? 

MR.  BRIGHT:  Because  they  go  to  the  points  or  centers  of  ac- 
tivity to  live  a  social  life.  I  do  not  think  the  tendency  would  be  to 
spread  the  people  out  in  the  remoter  sections. 

DR.  WILCOX:  What  would  become  of  the  land  in  the  remoter 
sections? 

MR.  BRIGHT:  It  would  go  down,  and  there  would  be  less  ten- 
dency to  develop  it. 

MR.  LEUBUSCHER:  You  say  that  speculation  has  not  led  to 
holding  lands  out  of  use? 

MR.  BRIGHT:  I  don't  think  there  is  any  large  holding  of  land 
to-day  that  cannot  be  bought  and  sold  at  a  fair  price,  except  that  held 
for  individual  use. 

MR.  LEUBUSCHER:  You  are  aware  of  the  value  of  the  holdings 
of  the  Astors? 

MR.  BRIGHT:     I  know  that  they  are  very  large. 

MR.  LEUBUSCHER:  Is  it  not  a  fact  that  at  least  twenty-five 
per  cent,  of  the  value  of  their  land  is  held  out  of  use? 

MR.  BRIGHT:     I  do  not  think  so. 

MR.  LEUBUSCHER:  I  just  want  to  get  the  facts.  Is  it  not 
a  fact  that  they  own  one  hundred  acres  in  The  Bronx  that  are  not  de- 
veloped, that  are  fenced  in  and  with  a  sign  there — at  least  it  was  there 
within  a  couple  of  years  ago,  saying  "Not  for  sale."    Is  that  not  a  fact? 

MR.  BRIGHT:     I  do  not  know. 

MR.  LEUBUSCHER:     I  know  it  personally,  because  I  saw  it. 

MR.  BRIGHT:  Well,  if  you  know  it,  the  fact  must  be  so.  Never- 
theless I  would  like  to  undertake  to  buy  it  just  now  if  I  were  authorized 
to  do  so. 

MR.  LEUBUSCHER:  Have  you  known  of  the  Astor  family  sell- 
ing property? 

MR.  BRIGHT:    Yes. 

MR.  LEUBUSCHER:  Have  you  known  of  the  Astor  family  sell- 
ing land  within  the  last  fifteen  years? 

MR.  BRIGHT:  A  great  deal  of  it.  I  could  furnish  you  with  a 
large  number  of  conveyances. 

MR.  LEUBUSCHER:    When  was  that? 

MR.  BRIGHT:     There  are  a  great  number  of  them. 

281 


Ill 


MR.  LEUBUSCHER :  For  a  great  many  years,  from  the  time  of 
Jacob  Astor,  until  a  couple  of  years  ago,  they  did  not  have  any  sales  at 
all. 

MR.  BRIGHT:     I  would  not  say  about  that.     I  think  they  held 

land — 

MR.  LEUBUSCHER:  Do  you  think  the  fact  that  land  values 
have  been  more  heavily  taxed  recently  has  anything  to  do  with  the 
Astors  beginning  to  sell? 

MR.  BRIGHT :    I  do  not  think  that  is  the  reason. 
MR.  LEUBUSCHER:    You  said  to  Professor  Seligman  that  you 
thought  an  increment  tax  would  be  fairer  than  the  one  proposed? 
MR.  BRIGHT:     I  think  it  has  objections. 

MR.  LEUBUSCHER:  How  would  that  compare  with  a  super- 
tax on  land  values? 

MR.  BRIGHT:  What  do  you  mean  by  that? 
MR.  LEUBUSCHER:  What  I  mean  is  this:  This  next  year  we 
will  have  to  raise,  owing  to  the  direct  state  tax  of  about  thirteen  mil- 
lion dollars,  more  than  we  raised  in  191 5.  Would  it  be  fair  to  raise  that 
by  adding  an  extra  tax— just  a  little  tax  of  twenty  mills  on  to  land 
values — that  is  a  super-tax? 

MR.  BRIGHT:  To  put  it  on  both  would  be  fairer.  I  don't  see 
any  difference   between  this  tax  and  any  other. 

MR.  FIELD :    We  hear  some  discussion  now  about  the  attractive- 
ness of  security  investment,  bank  investment,  etc. 
MR.  BRIGHT:    Yes. 

MR.  FIELD:  Is  that  having  any  tendency  to  withdraw  invest- 
ment from  real  estate  because  of  the  fact  that  people  can  get  larger  re- 
turns from  good,  sound  securities  to-day,  than  they  can  get  from  real 
estate? 

MR.  BRIGHT :    I  think  that  is  true. 

MR.  FIELD:    To  what  extent  does  that  effect  real  estate? 
MR.  BRIGHT:    I  cannot  estimate  the  exact  extent. 
MR.  FIELD:     In  your  loans  you  figure  as  security  both  the  land 
and  building? 

MR.  BRIGHT:    Yes. 

MR  FIELD:  Assuming  that  the  selling  value  of  the  land  is  taken 
away  for  any  reason  from  the  man  who  made  a  loan  for  the  erection  of 
a  building,  would  you  increase  or  decrease  the  rate  of  interest  that  you 
charge  now? 

MR.  BRIGHT:  It  would  have  to  be  increased.  Then  we  would 
be  lending  almost  entirely  on  the  security  of  the  building. 

MR    FIELD :    You  would  charge  a  certain  sum  for  the  deteriora- 
tion of  the  building,  so  that  it  would  cost  the  builder  more  for  money? 
MR.  BRIGHT:    Yes. 

MR.  FIELD:     Would  that  increase  the  price  of  the  building? 
MR.  BRIGHT:     I  think  the  operating  cost  would  be  increased. 
MR.  FIELD :     Other  things  being  equal,  the  tenant  would  have  to 
pay  rent  based  on  the  increased  operating  cost  in  order  to  give  the 
builder  back  his  money? 

282 


MR.  BRIGHT:    Yes. 

MR.  FIELD:     He  would  have  to  pay  a  higher  rent. 

MR.  BRIGHT:    Yes. 

MR.  FIELD:  Then  the  tendency  would  be  to  raise  rents  in- 
stead of  lowering  them? 

MR.  BRIGHT:     Yes. 

MR.  FIELD:     Could  you  make  them  pay  that? 
MR.  BRIGHT:    You  could,  assuming  you  have  a  situation  where 
a  man  must  either  have  the  place  or  do  without. 

MR.  MARLING:  Do  you  consider  it  unfair  to  impose  an  incre- 
ment tax? 

MR.  BRIGHT:  That  is  the  opinion  I  mean  to  give.  It  is  fairer, 
however,  in  my  judgment,  than  the  single  tax. 

MR.  SIMON:  This  supposed  sign  marked  "Not  for  Sale,"  put  up 
by  a  large  holder  for  the  purpose  of  withholding  property,  the  fact  is, 
it  was  put  there  at  the  request  of  an  auctioneer  who  had  a  large  auction 
sale  of  300  lots  adjoining  this  land.  He  wanted  to  show  that  this  prop- 
erty was  not  in  the  market.  But  that  large  number  of  lots  sold  did 
come  into  the  market  notwithstanding  the  sign  and  in  the  course  of 
several  years  no  buildings  have  been  put  up  on  the  land  that  was  sold. 
They  did  not  put  that  sign  on  the  property  to  withhold  it  from  sale, 
did  they? 

MR.  BRIGHT:    I  think  it  is  a  joke. 

TESTIMONY  OF  MR.  ROBERT  D.  KOHN, 

Architect. 

MR.  KOHN:  I  am  neither  an  expert  on  this  subject  nor  have  T 
formed  any  opinion  as  to  the  results  of  this  measure.  I  want  to  apply 
myself  to  one  phase  of  it — the  importance  of  certain  other  regulations 
which  must  come  if  any  such  proposed  scheme  is  to  be  seriously  con- 
sidered.    I   refer  particularly  to   the   necessity  of  districting  the  city. 

I  do  not  know  how  familiar  it  is  to  you  what  great  damage  is  done 
in  New  York  City  by  the  wrong  sort  of  improvements ;  how  the  threat 
of  the  wrong  sort  of  improvement  on  some  piece  of  property  can  be 
used  for  blackmail  to  depreciate  the  value  of  property  in  order  to  force 
a  sale.  Most  of  us  know  what  has  happened  in  the  central  section  of 
this  city.  I  will  recite  one  venture.  A  client  of  mine  purchased,  between 
14th  and  23rd  Streets,  a  so-called  loft  building,  badly  built,  and  found 
that  his  income  from  the  building  was  very  must  less  than  he  had  any 
idea  it  would  be — in  fact  he  said  it  didn't  pay  a  decent  percentage  on  the 
investment,  owing  to  the  bad  character  of  the  building,  which  was 
built  for  speculative  purposes  and  to  sell.  He  decided  that  in  the 
future  he  would  put  his  money  into  better  buildings.  He  went  further 
uptown  and  purchased  three  private  houses  which  were  not  rentable 
at  the  time  because  of  the  gradual  invasion  of  business — but  still  it  was 
in  general  a  district  of  private  houses.  He  purchased  those  three  private 
houses  at  a  high  price,  which  price  had  been  caused,  to  be  sure,  by  the 
gradual  approach  of  business.  The  buildings  were  torn  down  and  a 
twelve  story  loft  building  erected.  He  immediately  rented  every  inch 
of  space  at  such  a  price  for  five  year  terms  that  the  building  paid  a 

283 


I  r 


\  ■  ,, 


;i| 


?  KS 


Ml 


Ml 


very  excellent  return  on  his  investment.    Within  two  years  thereafter 
the  street  was  solidly  built  up  in  Sinclair  loft  buildings.     VV  ithin  the 
five  years  almost  every  tenant  moved  out  and  went  ten  blocks  nirther 
up  into  another  district  with  exactly  the  same  relation  as  to  light  and 
air  and  to  the  shopping  district  then  as  his  building  had  had  hve  years 
before      At  the  present  time  the  building  is  only  nine  years  old,  and 
the  rents  have  come  down  until  I  do  not  beHeve  it  is  paying  3  i)er  cent, 
on  the  investment,  simply  from  the  fact  that  it  was  crowded  in  by 
similarly   mistaken   improvements   in   that   locality.      Now   the   city   is 
just  as  much  interested,  from  the  point  of  view  of  taxation  in  the  right 
sort  of  improvements,  as  is  the  property  owner  himself,  because  that 
particular  block  of  loft  buildings  does  not  bring  into  the  city  m  the  way 
of  taxes,  or  to  the  owners,  in  the  way  of  income,  anything  like  it  would 
have  brought  in  had  the  improvement  there  been  wisely  planned.     Had 
the  city  limited  the  size  or  area  of  land  that  the  building  may  occupy— 
that  particular  type  of  improvement,  which  proved  to  be  a  mistaken 
improvement  would  not  have  been  made.     And,  of  course,  the  effect 
of  this  unwise  loft  or  factory  building  construction  on  the  neighbor- 
ing retail  district  is  too  well  known  to  need  detaihng  here.     It  is  tor 
that  reason    that  I  believe  districting  and  zoning  the  city  is  most  im- 
portant.    Now  it  seems  to  me  here— I  know  I   am  getting  on  danger- 
ous ground,— that,  by  the  same  token,  if  the  tax  on  land  is  increased 
and  that  on  a  building  lowered  the  dangers  from  that  sort  of  thing  would 
be  ereatly  increased.    It  seems  to  me  particularly  so— in  the  residential 
sections  where  people  are  waiting  to  see  what  will  happen  before  any 
important   improvements   are   made.     A   single    owner   could    erect   a 
stable  or  a  garage  (this  could  be  done  in  the  finest  residential  section 
of  the  city),  and  immediately  force  down  the  price  of  all  the  neigh- 
boring property.     Now,  under  this  proposed  plan  he  could  easily  bui  d 
that  stable  at  very  small  expense    upon  his  property  and  there  would 
be  little  or  no  tax  on  the  "improvement".     He  would  be  risking  very 
little    but  the  effect  would  be  to  depreciate  the  value  of  all  neighbor- 
ing property,  and  destroy  a  part  of  the  city's  taxable  assets.     That  is 
my  particular  point.    On  one  block  in  which  I  am  interested  there  have 
been  filed  two  sets  of  plans  for  what  I  call  nuisances,  for  buildings  which 
are  probably  never  to  be  built.     On  the  one  filed  two  years  ago  there 
has  been   no  move   to   build.     In   both   cases   there  was   an   attempt 
to  secure  a  neighbor's  property  which  he  had  been  unwiUmg  to  sell      1 
think  it  would  increase  the  danger  of  such  threats  or  of  actual  mistaken 
improvements,  if  you  decrease  the  tax  on  buildings,  unless  the  city  is 
first  provided  with  a  scheme  of  development  of  districts  or  zones. 

TESTIMONY  OF  DR.  ROBERT  MURRAY  HAIO, 

Instructor  in  Economics,   Columbia   University,   Investigator  for  the 

Committee  on  Taxation. 

PROFESSOR  SELIGMAN:     I  believe  you  were  to  speak  to  us 

on  two  points:  ^    ,        •     1     . 

First  on  the  latest  developments  of  the  single  tax  experiment  in 
Canada  and  in  this  country,  and  second,  on  the  probable  eff(;cts  of  the 
reduction  in  rents  in  the  tenement  house  district  in  case  the  tax  was 
taken  off  entirely  from  buildings.  Will  you  say  a  few  words  about 
each  point? 

284 


DR.  HAIG:  The  first  point  is  disposed  of  very  quickly.  The 
tendency,  as  indicated  in  the  report  which  I  filed  with  the  Committee 
some  time  ago,  seems  to  be  working  out  along  substantially  the  same 
lines.  With  the  hard  times  in  Western  Canada  in  connection  with  the 
war,  the  pressure  upon  holders  of  vacant  property  was  so  great,  and 
the  amount  of  unpaid  taxes  increased  so  considerably,  as  to  cause  some 
apprehension.  In  Edmonton  the  pressure,  due  to  unpaid  taxes,  was  so 
great  as  to  prompt  the  mayor  to  make  an  attack  upon  the  single  tax 
system  in  an  open  meeting  of  the  citizens  of  the  town. 

Of  interest  also  is  the  announcement  made  by  Honorable  Wilfred 
Garrepy,  who  is  minister  of  municipalities,  to  the  eflfect  that  it 
is  the  intention  of  the  Liberal  Government  of  Alberta  in  the  winter 
session  of  the  Legislature  to  introduce  a  modification  of  the  plan  which 
is  now  in  force  in  the  towns  of  Alberta  and  which  has  involved  some 
financial  difficulty — 

PROFESSOR  SELIGMAN:     Modification  of  what  plan? 

DR.  HAIG:  In  the  towns  of  Alberta  a  few  years  ago  all  of  the 
taxes  were  placed  upon  the  land.  The  result  was,  in  many  cases,  over- 
assessment  and  very  high  rates.  The  problem  was  so  acute  that  in  the 
last  few  months  an  announcement  has  been  made  that  the  Government 
this  winter  will  make  some  modification  of  the  plan. 

Last  Tuesday,  I  am  informed,  the  electorate  of  Pueblo,  by  a  small 
majority,  repealed  their  measure  providing  for  the  reduction  of  the  tax 
on  buildings  in  two  installments — one  of  which  had  already  been  made. 
I  made  a  supplementary  note  in  my  report  about  Houston's  situation. 
On  March  3rd,  after  my  report  proper  was  written,  a  Court  order  was 
issued  directing  the  city  officials  to  assess  land  at  the  same  per  cent, 
of  full  value  as  they  do  buildings.  So  far  as  I  know  that  is  all  that  has 
happened  since  the  report  came  out. 

The  other  point  is  really  an  addendum  to  my  second  report,  that  is 
the  one  dealing  with  conditions  in  New  York  City.  Since  last  summer 
there  has  been  made  available  information  from  the  records  of  the  tene- 
ment house  department  with  regard  to  the  number  of  apartments  in  the 
various  tenement  houses  and  the  rentals  paid.  I  understand  that  the 
rental  data  is  not  entirely  trustworthy — but,  in  the  first  of  my  state- 
ments, I  do  not  depend  upon  the  accuracy  of  the  rental  data,  but  merely 
upon  the  accuracy  of  the  data  as  to  the  number  of  apartments  in  the 
various  buildings.  In  the  report  there  were  five  districts  selected  made 
up  of  buildings  which  are  classified  as  tenements  under  the  law.  They 
were,  the  uptown  east  side  section,  the  Rivington  Street  section,  the 
Houston  Street  section,  the  Washington  Heights  walk-up  apartment 
section,  and  the  elevator  apartment  section.  By  using  the  information 
in  the  report  in  connection  with  the  new  information  obtained  from  the 
tenement  house  department,  I  find  that  the  maximum  reduction  of  rents, 
that  is  the  amount  of  taxes  on  buildings  which  would  be  removed  under 
this  assumption,  in  the  uptown  tenement  house  section  on  the  upper 
east  side,  for  the  first  year,  to  be  almost  exactly  ten  cents.  To  put 
it  in  another  way,  the  maximum  that  the  renter  of  an  apartment  in  this 
section  on  the  upper  east  side  might  receive  in  the  way  of  reduction  in 
the  first  year  under  this  plan  for  reducing  the  taxes  on  buildings  ten 
per  cent,  annually  would  be  10  cents. 

PROFESSOR  SELIGMAN:    On  the  total  rent  for  the  year? 

«85 


ill 


\\ 


m 


\\\   \ 


DR.  HAIG:  No,  sir.  Ten  cents  per  month.  The  figure  for  the 
Rivington  Street  section  is  eight  cents  per  month,  the  residents  down- 
town using  a  smaller  amount  of  building  value.  In  the  Houston  Street 
section  it  is  9^  cents;  in  the  walk-up  apartment  section,  17  cents;  and 
in  the  elevator  apartment  section  35  cents. 

At  the  end  of  five  years, — if  the  plan  which  is  most  seriously  con- 
sidered should  be  carried  into  effect,  that  is  to  reduce  the  taxes  by  one- 
half  by  five  annual  reductions — the  maximum  available  from  this  source 
for  reduction  in  rent  for  the  uptown  section  would  be  50  cents.  The 
tenants  might  possibly  pay  50  cents  less  on  their  rents.  In  the  Riv- 
ington Street  section  it  would  be  39  cents,  in  the  Houston  Street  sec- 
tion 48  cents,  in  the  walk-up  section  83  cents,  and  in  the  elevator  sec- 
tion $1.87. 

At  the  end  of  the  five-year  period,  if  the  tenants  got  the  maximum 
benefit  of  the  reduction  in  the  tax  on  buildings,  the  renter  of  one  of  the 
apartments,  in  the  uptown,  east  side  districts  may  expect  to  pay  $10.82 
per  apartment  per  month,  instead  of  $11.32,  as  now  paid.  The  other 
figures  are,  for  Rivington  Street,  $12.89,  instead  of  $13.28;  for  the  Hous- 
ton Street  section,  $16.38,  instead  of  $16.76;  in  the  walk-up  section, 
$30.95,  instead  of  $31.78;  and  in  the  elevator  apartment  section,  it  would 
be  $50.63,  instead  of  $52.50. 

The  percentages  of  these  decreases  are  as  follows: 

Uptown   tenements    44% 

Rivington  Street  tenements 2.9% 

Houston   Street  tenements    2.9% 

Walk-up  apartment  section    2.9% 

Elevator  apartment  section   3-6% 

The  data  indicates  that  it  may  be  true  that  the  larger  the  amount 
of  the  rent  paid  the  greater  the  reduction  proportionately,  but  the 
basis  is  entirely  too  narrow  for  safe  generalization. 

May  I  also  say  that  in  the  tenement  house  district  the  rentals  are 
fixed  by  50-cent  units,  so  that  the  reduction  of  50  cents,  39  cents,  48 
cents.,  etc.,  might  possibly  be  passed  on  if  the  pressure  became  acute. 

I  want  to  qualify  somewhat  the  statements  made  above.  As  I 
pointed  out,  if  in  discounting  the  added  burdens  on  land,  the  value  of 
the  land  depreciates,  buildings  would  carry  a  higher  share  of  the  bur- 
den than  indicated.  Because  of  this  the  reduction  will  be  less  than  the 
figures  given,  but  how  much  less  would  depend  upon  the  discounting 
of  the  future  burden. 

PROFESSOR  SELIGMAN:  I  understand  you  to  say  that  if  this 
scheme  went  into  effect,  whereby  at  the  end  of  five  years  one-half  of 
the  tax  on  buildings  would  be  put  upon  land,  the  utmost  possible  bene- 
fit that  could  come  to  the  tenants  of  our  tenement  houses  is  represented 
by  the  figures  that  you  have  just  mentioned? 

DR.  HAIG:  With  the  further  assumption,  of  course,  that  the  only 
benefit  we  could  get  would  be  the  decrease  in  the  tax  on  buildings.  If 
that  is  granted,  your  statement  is  correct. 

PROFESSOR  SELIGMAN :  Do  I  understand  you  also  to  believe 
that,  in  your  opinion,  it  is  not  certain,  as  an  economic  proposition,  that 
under  actual  conditions  in  New  York  a  decrease  in  the  taxes  of  build- 


ings  would  mean  a  decrease  in  rentals  or  proportionately  larger  accom- 
modation at  the  same  rentals?  In  your  opinion,  is  there  any  condition 
of  friction  which  may  militate  against  this  result? 

DR.  HAIG :  There  is  a  serious  element  of  friction  in  passing  on  the 
amount  of  the  decrease.  There  would  be  the  ignorance  as  to  just  what 
the  amount  is  and  the  pressure  under  which  the  landlord  would  be  to 
get  the  last  cent  out  of  the  tenant  because  of  the  increased  land  tax. 
The  landlord  would  use  the  argument  for  raising  the  rent  that  it  is 
due  to  the  pressure  put  on  him  because  of  the  increased  tax  on  land. 
In  the  long  run,  I  think  that  the  tenants  would  get  the  reductions. 

PROFESSOR  SELIGMAN :  Is  your  general  conclusion — on  the 
'basis  of  your  investigation — that  the  statement  as  to  the  alleged  benefits 
that  would  ensue  to  the  working  classes  of  this  city  through  a  great  re- 
duction of  rents  or  through  very  much  better  accommodations  at  the 
same  rents,  appears  to  be  grossly  exaggerated? 

DR.  HAIG:  A  good  many  of  the  statements  that  I  have  read 
have  been  grossly  exaggerated.  The  whole  thing  appears  to  have  been 
grossly  exaggerated  on  both  sides.  On  the  basis  of  the  figures  the  re- 
ductions in  rents  would  probably  not  be  more  than  five  per  cent. 

I  believe  personally  we  should  collect  a  larger  and  larger  share  of 
the  ground  rent,  but  it  should  be  so  arranged  as  not  to  confiscate  the 
values  of  to-day.  I  think  this  scheme  of  reducing  the  tax  on  buildings, 
if  carefully  imposed,  could  be  introduced  without  a  great  deal  of  danger. 
The  present  time  is  not  the  time  to  do  it.  Moreover,  the  plan  of  a  stated 
yearly  decrease  is  not  a  wise  one.  I  think  there  should  be  a  flexible 
plan.  I  should  allow  decreases  in  the  good  years,  and  a  suspension  ot 
decreases  in  bad  ones.  That  is  also  qualified  by  the  financial  exigencies 
of  the  situation.  It  seems  to  me  a  tax  on  buildings  is  not  a  bad  tax 
compared  with  some  of  the  alternatives,  if  we  must  have  money.  I  do 
not  believe  a  tax  on  buildings  is  the  worst  alternative. 

MR.  LEUBUSCHER:  In  other  words,  you  believe  in  local  option 
in  taxes,  that  is,  if  this  were  a  good  year  you  would  decrease  taxes  and 
if  it  were  a  bad  year  you  would  not? 

DR.  HAIG:  I  believe  in  elasticity.  I  don't  think  that  necessarily 
involves  local  option.  In  general.  I  fight  shy  of  local  option  in  taxes. 
It  is  likely  to  have  some  very  undesirable  effects.  It  seems  to  me  that 
the  Canadian  experiment  shows  that  with  a  proper  degree  of  elasticity 
the  thing  could  be  done  gradually  without  trouble. 

MR.  LEUBUSCHER:  Your  figures  are  given  on  a  five-year  basis. 
The  poor  tenant  on  the  east  side  would  save  only  50  cents  a  month  if  the 
plan  was  adopted — this  five  year  plan — that  is  one-half  of  the  taxes  on 
buildings  taken  off? 

DR.  HAIG:    Yes,  that  is  it. 

MR.  LEUBUSCHER:  That  means  if  the  full  plan  were  adopted 
and  all  taxes  taken  off,  it  would  be  double  that,  one  dollar  a  month,  so 
that  for  a  man  earning  two  dollars  a  day  it  would  mean  one  dollar  a 
^nonth  decrease?  ' 

DR.  HAIG:     That  is  a  substantial  item. 

287 


1 


i  t 


I'! 


MR.  LEUBUSCHER:  Then,  too,  you  predicate  your  statement  on 
the  reduction  of  rents  merely  on  the  amount  of  the  reduction  of  the 
taxes,  do  you  not? 

DR.  HAIG:    I  do. 

MR.  LEUBUSCHER:  So,  therefore,  you  did  not  take  into  con- 
sideration the  fact  that  if  we  relieve  buildings  from  taxation  it  may  lead 
to  the  erection  of  competing  tenements? 

DR.  HAIG :  I  don't  see  how  you  can  possibly  get  even  this  amount 
of  reduction  without  some  alternative  offered  to  the  tenant  in  the  natur»i 
of  some  other  building  to  which  he  can  go. 

MR.  LEUBUSCHER:  So  that  if  that  were  a  fact  and  if  there 
were  more  buildings  erected  by  reason  of  the  increase  in  land  values 
and  a  decrease  in  the  taxes  on  buildings — if  the  tendency  of  that  was  to 
cause  the  erection  of  more  buildings  then  the  rents  in  those  tenements 
at  least  would  be  still  further  reduced? 

DR.  HAIG:     I  don't  think  so. 

MR.  LEUBUSCHER:    Not  by  competition? 

DR.  HAIG :  No.  I  think  the  cost  of  furnishing  those  accommoda- 
tions will  be  reduced  by  the  amount  of  fifty  cents.  If  the  tenant  is 
very,  very  lucky,  he  may  get  it. 

MR.  LEUBUSCHER:  If  we  adopted  the  other  scheme  it  would 
be  a  dollar  a  month? 

DR.  HAIG:    Yes. 

MR.  LEUBUSCHER:  And  in  the  case  of  the  elevator  apartments 
they  would  save  four  dollars  a  month? 

DR.  HAIG:    Yes. 

MR.  LEUBUSCHER:    That  would  mean  $50  a  year? 

DR.  HAIG:     Yes,  sir. 

MR.  LEUBUSCHER:  You  spoke  about  this  benefit  to  the  work- 
ing classes  in  answer  to  the  Professor's  question.  He  asked  whether 
this  benefit  would  accrue  to  the  working  class,  namely,  a  saving  at  the 
end  of  ten  years  to  the  poor  tenement  house  dweller  of  one  dollar  a 
month — would  that  be  the  only  benefit  coming  to  the  working  classes 
upon  the  adoption  of  this  policy? 

DR.  HAIG:  I  think  any  other  benefits" that  he  might  gel  would 
be  very  slight.     Of  course,  they  are  entirely  impossible  of  calculation. 

MR.  LEUBUSCHER:  The  probable  benefit  would  be  this,  would 
it  not?  You  have  just  stated  that  the  decrease  of  taxes  on  buildings  and 
the  increase  of  taxes  on  land  values  would  result  in  the  erection  of  more 
buildings,  at  least  in  the  beginning,  and  that  was  the  case  in  Vancouver 
and  Edmonton  in  Canada,  was  it  not? 

DR.  HAIG:  I  think  it  was  so  in  the  Canadian  northwest.  But 
there  are  other  factors  connected  with  this. 

MR.  LEUBUSCHER:    Would  not  that  be  the  natural  tendency? 

DR.  HAIG:  There  are  other  factors  in  the  situation  which  work 
the  other  way. 

MR.  LEUBUSCHER:  If  there  are  human  beings  in  Vancouver 
and  Edmonton  with  the  same  desires  as  the  human  beings  here,  do  they 
differ  from  those  in  New  York  City? 

288 


DR.  HAIG:  They  do,  sir,  in  a  very  essential  particular.  When 
you  come  to  New  York  City  they  more  carefully  discount  the  future. 
They  make  more  careful  use  of  their  assets.  They  sometimes  build  in 
anticipation  in  order  to  preserve  their  title  to  the  increment.  If  you 
impair  seriously  the  increment  you  start  a  force  which  discourages 
buildings.  There  are,  of  course,  two  counter-acting  forces  and  upon 
the  relative  strength  of  these  forces  all  depends. 

MR.  LEUBUSCHER:  Assuming  that  the  experience  of  Van- 
couver, Edmonton,  and  other  places  in  Northwest  Canada  would  be 
duplicated  here,  and  naturally  people  would  want  to  have  more  and 
better  houses,  would  not  the  workingman  who  is  a  tenant  get  employ- 
ment, and,  therefore,  benefit? 

DR.  HAIG:  I  think  that  would  depend  upon  where  the  money 
came  from.  You  are  taking  away  from  the  income  of  land  owners ;  be- 
fore one  can  answer  your  question  you  must  answer  what  the  land 
owners  would  have  done  with  their  income  if  it  had  not  been  taken  by 
the  city. 

MR.  LEUBUSCHER:  Is  not  the  lesson  of  experience  the  best 
lesson  in  the  world?  If  a  certain  condition  produces  a  certain  result  in 
one  place  is  it  not  probable  that  it  would  produce  the  same  result  in 
another  place? 

DR.  HAIG :  If  you  have  exactly  the  same  conditions,  but  you  have 
never  been  able  to  have  exactly  the  same  conditions  in  two  communi- 
ties. Moreover,  I  don't  think  you  can  completely  isolate  factors  in  this 
fashion. 

MR.  LEUBUSCHER:  You  know  from  your  studies  that  if  you 
tax  any  production  of  labor  you  make  it  more  expensive  and  if  you  re- 
move all  taxes  you  cheapen  it.     That  that  is  a  result — 

DR.  HAIG:     I  should  agree  with  that. 

MR.  LEUBUSCHER:  Therefore,  apart  from  those  other  effects 
we  spoke  of — the  removal  of  taxes  on  the  product,  namely,  in  this  case» 
the  buildings,  would  have  a  tendency  to  cheapen  the  building,  cheapen 
the  cost  of  erection  of  buildings,  and,  therefore,  increase  the  number 
of  buildings? 

DR.  HAIG :  If  you  assume  in  your  conditions  the  absence  of  these 
other  factors.     But  I  say  they  are  present. 

PROFESSOR  SELIGMAN:  I  would  like  to  ask  you  one  last 
question,  which  I  should  not  have  put  had  it  not  been  for  certain  ques- 
tions by  the  last  speaker.  You  have  made  a  very  careful  study  of  this 
whole  situation  and  the  history  of  it  in  Canada  and  in  this  country. 
If  the  Government  of  New  York  City  was  to  come  to  you  and  say,  "Give 
me  your  views — shall  we  now  adopt  this  scheme  which  has  been  pro- 
posed for  the  untaxing  of  buildings" — "shall  we  introduce  a  bill  into 
the  Legislature  to  that  effect,"  would  you  say  yes  or  no? 

DR.  HAIG:  Under  present  conditions  I  should  not  hesitate  to 
say  no. 

MR.  LEUBUSCHER:  You  prefer  the  increment  tax  to  this 
scheme? 

DR.  HAIG:  I  think  some  of  the  ends  could  be  better  gained  by 
this  method. 

289 


I 


I 


MR.  LEUBUSCHER:  But  on  the  whole,  you  think  the  tendency 
of  this  scheme  is  in  the  right  direction? 

DR.  HAIG:    I  do. 

MR.  LEUBUSCHER:  What  do  you  say  to  a  super-tax  on  land 
values  in  order  to  meet  the  increased  cost  in  the  budget  of  New  York 
City? 

DR.  HAIG:  I  think  it  would  be  a  very  foolish  thing  at  this  par- 
ticular time  and  in  the  situation  of  real  estate  just  now. 

MR.  LEUBUSCHER:  Would  you  advocate  an  increment  tax 
under  present  conditions? 

DR.  HAIG:  I  don't  think  it  would  bring  in  anything  just  now. 
It  is  a  matter  of  looking  to  the  future. 


1  • '  1 


! 


i       t 


ii^ 


I 

!: 


THIRD  HEARING, 

November  15,  1915,  2.30  p.  m.,  Mayor's  Reception  Room,  City  HaU 

Professor  Edwin  R.  A.  Seligman,  Presiding. 


290 


TESTIMONY  OF  MR.  HENRY  DE  FOREST  BALDWIN, 
Treasurer,  Society  to  Lower  Rents  and  Reduces  Taxes  on  Homes. 

MR.  BALDWIN :  Taxes  must  be  levied.  There  are  two  important 
TeZTft  "^''^  respect  to  taxes-who  shall  pay  them,  and  fo^^whose 
ult^^.tl^  r'^'"' k'  'Y^  ^^  expended.    As  the  tax  burden  is  not  always 

hit^fn  L  "'>  '^'  P'^P^"  ^^^  P^y  '^^  t^^  i"  the  first  instanc^e! 
but  can  be  passed  on  to  others,  we  find  that  some  kinds  of  taxes  are 
popular  in  certain  circles.  A  popular  tax  is  one  that  aids  one  class  of 
people,  and  the  burden  of  which  is  borne  by  people  who  do  not  dearly 

ZiPtTet  /'"'  ''.'^  -'''  P^"^  ''-  Examp^les^f  popular  taxes  a  ^ 
tariff  taxes  for  protection  and  taxes  on  houses.  Taxes  on  land  are  un- 
popular among  land  owners,  because  they  cannot  be  passed  on.  Before 
inn  ;«  !f-^  .  u  """l  necessary  to  argue  that  the  incidence  of  taxa- 
tion  IS  different  when  the  tax  is  levied  on  improvements  from  what  it 
IS  when  it  is  levied  on  land  values. 

Inasmuch  as  it  has  become  a  habit  to  designate  any  proposition  to 
tax  land  values  as  distinguished  from  improvements  as  "sing^Ie  tax"  it 
is  perhaps  not  inappropriate  to  note  here  that,  if  that  is  so,  New  York 
City  has  always,  to  a  considerable  extent,  used  the  single  tax  in  its  tax 
system.  A  large  part  of  our  street  improvements  has  been  paid  for  bv 
special  assessments  for  benefit  from  the  earliest  times.  Of  course  these 
assessments  are  nothing  but  a  special  tax  on  land  values,  and  are'levied 
without  reference  to  building  improvements.  What  we  propose  in  re- 
ducing the  tax  on  improvements,  and  in  placing  a  surtax  to  take  care  of 
the  debt  service  on  land  values,  is,  in  theory  and  in  reality,  nothing  but 
an  extension  of  the  doctrine  of  special  assessments  for  benefit  The 
single-tax  philosophy  is  not  more  involved  in  that  which  we  advocate 
than  m  assessments  for  benefit. 

.»u  ^*  "^Jt^T^^  Pf/^I^^^Jy.  ^^jf^^^t  to  this  Committee  that  the  real  diffi- 
culty  with  New  York  City  finances  to-day  is  that  when  we  undertook 
to  spend  vast  sums  of  money  upon  transportation,  we  did  not  provide 
that  the  property  particularly  benefited  by  these  expenditures  should 
bear  the  cost  of  them.  Besides  the  subways,  that  $62,000,000  that 
nas  been  spent  on  bridges  and  approaches  also  should  have  been  as- 
sessed upon  land  within  the  area  which,  by  reason  of  these  improve- 
ments, has  increased  in  value  many  times  their  cost.  We  have  a  big 
debt  incurred  for  improvements  which  lead  to  an  increase  in  rent  Hav- 
ing made  the  great  blunder  of  presenting  to  the  land  owners  within  par- 
ticular areas  the  immediate  benefits  due  to  these  public  improvements 
we  are  now  confronted  with  a  situation  which  requires  an  examination 
ot  our  entire  tax  system  and  which  calls  for  an  immediate  determina- 

2m 


\ 


V. 


It 


I  ,' 


! 


\l\ 


]VTi 


tion  as  to  what  classes  of  people  should  pay  for  these  and  other  elabor- 
ate improvements  already  made  and  those  yet  to  be  made. 

Certain  facts  which  are  perfectly  obvious  should  be  kept  in  mind : 
One,  taxes  have  got  to  be  increased.     From  some  source  much  larger 
revenues  must  be  secured.     Two,  taxes  likely  to  be  imposed  upon  a 
business  enterprise  constitute  a  very  large  element  in  determinmg  its 
action  when  seeking  a  location.     New  Jersey   and  Connecticut  have 
taken  many  factories  away  from  New  York  and  have  diverted  many 
others  from  coming  to  New  York  by  reason  of  the  higher  taxes  which 
their  managers  have  felt  would  be  imposed  here.     Three,  between  1906 
and  1914,  the  assessed  value  of  land  was  increased  from  three  and  one- 
third  billion  dollars  to  four  billion,  six  hundred  million  dollars,  which  is 
36  per  cent.;  the  tax  burden  on  real  estate  increased  from  85;^  million 
to  I44>4  milHons,  which  is  68  1/3  per  cent.;  the  population  increased 
from  a  little  over  4,000,000  to  something  over  5,000,000,  aboiit  25  per 
cent.     Notwithstanding  an  increased  tax  burden  land  values  increased 
more  rapidly  than  population.     But  the  increase  in  both   appears  to 
have  stopped  during  the  past  few  years.    Four,  New  York's  debt  was  in- 
curred for  public  improvements  of  one  kind  or  another  made  neces- 
sary so  as  suitably  to  prepare  the  land  within  the  city  limits  for  human 
habitation.     Land  is  not  fit  for  permanent  city  use  until  the  city  has 
spent  a  great  deal  of  money  in  anticipation  of  that  use.    Streets,  sewers, 
water  pipes,  pavement,  and  street  lighting,  are  necessary.     Transporta- 
tion lines,  bridges  and  tunnels,  so  as  to  give  access  to  the  property,  are 
necessary.     These  improvements,  part  of  which    under  our  system  are 
paid  for  eventually  out  of  the  general  tax  budget,  and  part  of  which  are 
paid  for  by  special  assessments  on  the  property  benefited  are  just  as 
necessary  as  the  buildings  which  are  erected  entirely  at  the  expense  of 
the  owners.     And  after  the  buildings  are  erected  and  people  living  in 
them  it  is  necessary  that  the  city  should  provide  parks  and  schools  and 
police  and   fire  protection.     For  such  purposes  was  our  city  debt  in- 
curred     All  such  improvements  are  calculated  to  add  directly  to  the 
value  of  the  land,  and  without  them  the  use  of  the  land  for  a  congested 
population  would  be  impossible. 

A  new  house  which  has  been  erected  on  land  made  ready  for  im 
provements  by  those  city  expenditures  is  not  increased  in  value  by  such 
expenditures.  Such  a  house  can  add  to  the  value  of  the  land  no  more 
than  its  real  cost.  Given  two  lots  of  equal  value,  if  one  were  improved 
with  a  suitable  house,  it  should  be  increased  in  value  merely  the  cost 
of  the  house,  including,  of  course,  a  fair  profit  to  the  builder. 

The  tenant  in  that  part  of  his  rent  which  is  attributable  to  the  land, 
pays  the  full  present  annual  value  which  public  improvements  have 
added  to  the  value  of  the  lot,  whether  the  land  owner  pays  for  these 
improvements  or  not,  and  irrespective  of  the  taxes  levied  on  the  land, 
but  in  that  part  of  his  rent  attributable  to  the  house,  he  pays  the  tax 
levied  on  the  house  whatever  it  may  be. 

The  owner  of  the  land,  in  his  rent,  collects  a  return  not  only  upon 
the  improvements  which  were  erected  at  his  own  expense  but  upon  the 
improvements  which  were  made  at  the  cit/s  expense.  The  tenant, 
therefore  pays  in  his  rent  his  share  of  these  improvements.  Any  tax 
on  the  land  cannot  be  transferred  to  the  tenant.  But,  in  so  far  as  the 
hou'^e  is  taxed  to  pay  for  public  improvements  that  tax  can  be  trans- 
ferred to  the  tenant  and  the  tenant  is  thus  obliged  to  pay  for  the  im- 
provements twice.    He  pays  once  to  the  landlord  in  his  rent  the  added 


value  which  the  improvement  gives  to  the  bare  land  and  he  pays  again 
in  the  tax  upon  the  house.  Tenants  receive  from  public  improvements 
no  benefit  which  they  do  not  pay  for  in  their  rents. 

Besides  improvements,  the  cost  of  which  is  reflected  in  land  values, 
we  have  in  New  York  City  $100,000,000  in  water  supply;  $100,000,000 
in  subways,  and  some  milHons  of  dollars  in  bridges  and  approaches 
which  are  beyond  any  present  need  of  the  city.  These  improvements 
have  been  planned  on  such  a  magnificent  scale  because  it  was  believed 
that  New  York  would  grow,  and  before  very  long  would  need  them. 
But  if  New  York  does  not  grow,  then,  to  that  extent  they  are  beyond 
our  needs  they  are  dead  loss.  For  this,  as  well  as  for  other  reasons, 
we  must  be  very  careful,  therefore,  not  to  check  the  growth  of  New 
York. 

Now,  I  understand  that  none  of  these  propositions  are  seriously 
questioned  by  the  members  of  your  Committeee.  They  raise  at  the  out- 
set an  all  important  question:  As  between  landlords  and  tenants,  who 
should  pay  taxes  to  meet  the  cost  of  these  improvements?  The  land- 
lords, who,  whether  they  pay  or  not,  will  collect  from  the  tenants  their 
annual  value  to  the  land — or  the  tenant  who,  in  any  case,  must  pay  their 
value  once  to  the  landlord? 

If  you  seek  to  make  the  tenants  pay,  you  are  adding,  by  the  amounts 
of  the  tax  levied  for  that  purpose,  a  burden  upon  the  great  mass  of  the 
people,  already  obliged  to  pay  a  higher  rent  than  is  paid  in  any  other 
place  in  the  world.  Is  that  likely  to  benefit  New  York  as  a  community? 
Or  is  it  likely  to  benefit  New  York  as  a  city? 

Again,  as  between  land  owners  and  business  interests,  who  should 
be  asked  to  pay  the  taxes  to  meet  the  cost  of  these  public  improvements? 
This  is  different  from  the  issue  between  landlords  and  tenants  because 
business  interests  can,  to  a  large  extent,  take  care  of  themselves.  If 
you  make  it  unprofitable  to  do  business  in  New  York,  notwithstanding 
New  York's  superb  location,  they  will  find  an  asylum  in  New  Jersey, 
Connecticut  and  elsewhere.  Why  should  these  outside  interests  be 
asked  to  pay  for  our  subways,  water  supply,  and  other  improvements 
which  were  constructed  in  order  to  render  land  suitable  for  residence 
and  business  purposes,  and  which  have  resulted  in  increasing  the  value 
of  the  land  to  at  least  twice  the  cost  of  the  improvements,  when  the 
rent  paid  covers  compensation  for  the  advantage  each  plot  has  over 
some  other  place,  including  the  advantages  derived  from  these  improve- 
ments? You  should  ask  yourselves  very  seriously  whether  the  city 
of  New  York  can  adopt  in  any  shape  a  "pay  as  you  enter"  tax  and  not 
suffer  seriously. 

We  can  offer  great  advantages  to  manufacturing  establishments 
and  because  of  that  we  charge  high  rents.  In  return  for  the  high  rents, 
we  offer  the  facility  of  location  here,  including  the  public  service  for 
which  our  city  debt  was  incurred  and  for  which  our  large  annual  budget 
is  expended.  But  if  we  ask  those  who  have  the  choice  to  go  elsewhere 
to  pay  for  these  advantages  twice,  once  to  the  landlord  in  high  rents  and 
again  to  the  tax  gatherer,  we  can  be  sure  that  a  great  many  of  such 
enterprises,  which  would  otherwise  come  to  New  York,  will  go  else- 
where. A  great  many  of  such  enterprises  already  located  in  New  York 
will  do  what  has  been  done  in  many  instances  heretofore — move  away. 
This  means  that  New  York  will  stop  growing.  The  real  estate  interests 
in  New  York  are  suffering  to-day  because  New  York  has — we  hope, 
only  temporarily — stopped  growing. 

293 


i) 


How  futile  it  is  to  expect  that  outsiders  will  come  here  and  pay 
high  rents  and  also  a  tax  to  pay  for  the  public  improvements  which  in- 
crease the  rent,  when  New  Jersey  and  Connecticut  and  even  Westchester 
offer  excellent  opportunities!  You  can  collect  a  very  little  after  the 
manner  of  highwaymen  from  our  present  property  tax  which  does  not 
affect  big  business  and  rich  people,  because  it  requires  merely  a  little 
carefulness  to  avoid  its  burdens,  and  it  bears  heavily  only  on  the  care- 
less, the  weak  and  the  defenseless.  But  you  cannot  expect  to  induce 
business  and  large  interests  to  submit  to  exaction  beyond  these,  which 
other  localities  impose,  except  to  the  extent  that  rents  are  thereby  re- 
duced. Taxes  upon  the  laboring  classes  and  upon  business  to  pay  for 
improvements  which  have  increased  land  values  can  oppress  and  de- 
moralize the  humbler  portion  of  the  community,  but  they  must  retard 
the  development  of  the  city.  Those  who  collect  the  benefit  of  public 
improvements  should  pay  their  cost.    This  is  expedient,  as  well  as  just. 

If  we  had  paid  for  all  our  public  improvements,  including  subways, 
bridges  and  water  supply  by  assessment  for  benefit,  since  1906,  we 
should  have  still  an  increase  in  land  values  over  assessments  levied  of 
nearly  $500,000,000.  If  we  had  done  this,  would  New  York  be  a  worse 
or  better  place  to  live?  Is  it  more  radical  or  more  unjust  to  pay  for 
the  subway  by  assessment  than  to  pay  for  Riverside  Park  by  assess- 
ment? The  argument  against  paying  for  more  of  our  improvements  by 
assessments,  which  convinced  those  whose  responsibility  it  was  to  de- 
cide, was  that  the  older  portions  of  the  city  had  not  paid  for  their  similar 
improvements  by  assessments  and  that  they  had  an  obligation  to  aid 
the  newly  developed  districts.  Whether  this  was  sound  or  not,  it  has 
been  decided  in  favor  of  the  outlying  districts.  It  is  for  you  to  pursue 
intelligently  the  logical  course  which  is  pointed  out  by  that  decision, 
and  to  advocate  a  tax  system  which  will  make  the  land  in  the  older 
districts  pay  their  share  of  the  development  of  the  outlying  districts  and 
not  jeopardize  the  city*s  growth  and  oppress  its  laboring  classes  by 
seeking  contributions  for  such  purposes  elsewhere  than  from  the  land. 
You  cannot  get  the  money  anywhere  else,  except  at  the  expense  of  the 
city's  prosperity.  The  land  cannot  move  away  and  business  can  move. 
The  greatest  danger  to  these  real  estate  brokers  who  have  been  so 
prominent  in  this  tax  discussion  is  to  have  New  York  stop  growing. 

If  we  adopt  a  tax  system  which  encourages  New  York  to  grow 
we  shall  bring  into  play  a  power  working  for  a  steady  increase  in  land 
values,  which  will  go  a  long  way  towards  mitigating  the  disadvantage 
to  land  owners  of  having  the  entire  debt  service  placed  upon  land.  On 
the  other  hand,  if  we  adopt  a  tax  system  which  keeps  people  from 
locating  in  New  York  and  drives  people  out  of  New  York,  the  land 
owners  must  face  falling  values  and  also  their  share  of  the  taxes  to  pay 
for  several  hundred  million  of  dollars  worth  of  improvements  at  present 
unnecessary  and,  for  a  long  time  to  come,  unbeneficial,  which  have  been 
undertaken  with  the  expectation  that  the  City  of  New  York  will  grow. 
We  shall  have  to  pay  two  hundred  million  dollars  for  our  Catskili 
water  supply,  two  hundred  million  dollars  for  our  subways,  and 
seventy  per  cent,  of  one  hundred  million  dollars  for  State  Highways  and 
seventy  per  cent,  of  one  hundred  million  dollars  for  the  barge  canal. 
The  benefit  to  us  from  these  particular  expenditures  will  be  largely  de- 
ferred, and  those  for  the  state  roads  will  be  very  indirect.  To  get  these 
expenditures  reflected  in  land  values.  New  York  must  grow.  You  can 
help  its  growth.     Reduce  rents  by  reducing  taxes  on  houses  and  by 

294 


placing  a  sur-tax  on  land  values  to  take  care  of  the  debt  service.  Let 
the  land,  which,  in  eight  years,  has  increased  in  value  more  than  one 
billion  dollars,  pay  for  the  improvements  which  have  made  that  increase 
possible.  There  is  nothing  predatory  or  revolutionary  in  bearing  in 
mind  the  use  for  which  the  money  is  raised  in  classifying  property  for 
taxation.  New  York  may  grow  in  spite  of  anything  we  may  do,  but  it 
is  better  to  insure  its  growth  by  letting  the  world  know  that  there  is 
no  better  place  to  do  business  and  to  manufacture  and  no  better  place 
to  reside.  We  can  announce  to  the  world  that  this  is  the  best  place  to 
locate  a  factory,  the  best  place  to  dwell,  the  best  place  to  bring  up  a 
family,  the  best  place  to  do  business,  because,  while  rent  is  high,  taxes 
on  individuals  and  business  are  low. 

It  is  by  a  constant  rise  in  the  tide  of  population  that  New  York  has 
surmerged  and  overwhelmed  all  of  its  difliiculties  in  the  past  caused  by 
the  errors  of  judgment  and  by  the  corruption  of  its  rulers.  In  growth 
lies  a  sure  remedy. 

I  desire  to  say  one  word  about  what  our  opponents  say  with  respect 
to  a  possible  catastrophe  in  case  a  greater  amount  of  the  cost  of  the 
city  government  and  of  the  debt  service  is  laid  on  land  values.  Dr. 
Haig's  investigation  shows  conclusively  that  no  such  calamity  has  been 
observed  in  any  of  the  cities  where  land  values  have  been  more  heavily 
taxed  than  other  kinds  of  property.  But  we  do  not  need  to  go  to  Canada 
or  Houston,  Texas,  or  Pittsburgh  to  find  competent  proof  that  such 
fears  are  groundless.  We  have  an  example  right  here  in  New  York. 
Twenty  years  ago  it  was  the  rule  in  the  Tax  Department  to  assess  un- 
improved property  at  one-third  of  its  value,  and  improved  property  at 
two-thirds  of  its  value.  If  a  man  had  a  vacant  lot,  and  desired  to  put  a 
building  on  it,  he  had  to  figure  upon  paying  a  tax  on  the  building  and 
double  the  tax  theretofore  paid  on  his  land.  This,  of  course,  was  a  great 
encouragement  to  holding  land  out  of  use.  In  accordance  with  law, 
the  assessment  is  now  made  more  approaching  equality.  Unimproved 
property  is  assessed  at  full  value,  as  well  as  improved  property.  The 
change  to  this  method  from  the  old  method  was  a  step  in  the  same  direc- 
tion as  we  ask  you  to  go,  and  was  a  far  more  radical  change  than  that 
which  we  ask  you  now  to  make.  If  this  change  did  not  cause  a  revolu- 
tion or  a  catastrophe,  we  have  no  reason  to  expect  trouble  from  the  plan 
we  ask  you  to  adopt. 

It  is  said  that  what  we  propose  would  tend  to  bring  vacant  land  into 
use  and  cause  an  increase  in  building.  I  have  heard  real  estate  men 
say  that  New  York  was  already  overbuilt.  It  may  very  well  be  that 
they  were  right  from  their  point  of  view.  But  their  point  of  view  is  not 
necessarily  the  point  of  view  of  the  public  nor  the  point  of  view  from 
which  to  deal  with  the  city's  interest.  When  population  is  so  congested 
as  to  cause  unsanitary  and  indecent  conditions,  we  may  be  sure  that  such 
a  situation  calls  for  improvements  to  land.  This  does  not  mean  merely 
that  there  should  be  no  more  houses ;  it  may  mean  that  there  should  be 
better  transportation  facilities  to  take  the  people  who  live  in  the  con- 
gested part  of  the  city  quickly  and  easily  back  and  forth  from  their 
work ;  it  may  mean  elaborate  public  work  to  fit  land  for  houses.  From 
the  city's  point  of  view,  both  as  a  corporation  and  as  a  governmental 
agent,  when  we  show  that  living  conditions  are  unsatisfactory,  we  have 
shown  that  some  land,  somewhere,  should  be  improved.  It  may  very 
well  be  that  the  owner  of  a  lot  on  the  outskirts  of  the  city  may  consider 
that  his  lot  is  not  ripe  for  improvement  because  the  city  has  yet  to 

295 


spend  a  great  deal  of  money  in  its  neighborhood  in  order  to  make  it 
possible  for  the  people  to  use  it,  while,  at  the  same  time,  there  are  parts 
of  the  city  where  people,  by  force  of  circumstances,  are  obliged  to  live 
in  a  crowded  and  indecent  condition.  Therefore,  the  individual  real 
estate  owner's  point  of  view  is  not  the  point  of  view  which  should  be 
taken  by  the  city  authorities  or  by  the  public  in  general. 

PROFESSOR  SELIGMAN:  You  have  spoken  of  the  fact  that 
all  the  benefit  of  our  revenue  system  goes  to  land.  Does  the  benefit  of 
the  expenditures  for  education  go  entirely  to  the  land  owner? 

MR.  BALDWIN:     Yes,  sir. 

It  goes  to  the  people  who  send  their  children  to  school,  certainly, 
but  it  also  goes  to  the  landlord.  It  is  paid  to  him  in  the  shape  of  rent. 
They  do  not  get  anything  they  do  not  pay  for.  The  benefit  of  the 
schools  goes  to  the  people  who  have  children  and  who  send  their  chil- 
dren to  school. 

PROFESSOR  SELIGMAN :  Is  there  any  reason  why  they  should 
not  pay  for  this  benefit? 

MR.  BALDWIN :  No ;  they  have  got  to  pay  for  it. 

PROFESSOR  SELIGMAN :  I  say,  is  there  any  reason  why  they 
should  not  pay  for  it? 

MR.  BALDWIN:  I  do  not  see  any  reason.  I  think  we  ought  to 
have  public  schools  where  they  can  go  free.  But  they  actually  pay  for 
them  in  their  rent. 

PROFESSOR  SELIGMAN:  How  about  the  police  expenditures 
of  ten  or  fifteen  millions?  Do  you  think  that  the  benefit  of  this  expen- 
diture goes  exclusively  to  the  land  owners? 

MR.  BALDWIN:  Yes,  it  goes  exclusively  to  the  land  owner;  he 
gets  it  all  in  his  land.  The  land  owner  gets  it  all  back.  If  we  do  not 
have  police,  the  value  of  land  goes  down  as  it  did  in  Chicago  where 
they  had  the  black-hand  outrages  in  a  certain  quarter  of  the  city ;  there 
the  rents  went  down. 

PROFESSOR  SELIGMAN:  Do  you  know  of  any  connection 
at  all  between  wages  and  expenditures  of  government?  If,  for  instance, 
we  had  no  police  protection  in  New  York  City,  do  you  think  that  wages 
would  be  as  high  as  they  are? 

MR.  BALDWIN :    They  would  be  lower. 

PROFESSOR  SELIGMAN:  Does  the  benefit  of  the  police  de- 
partment go  at  all  to  the  wage  earner? 

MR.  BALDWIN:  Of  course;  everybody  gets  some  benefit.  I 
claim  he  pays  for  it  in  his  rent. 

PROFESSOR  SELIGMAN :  Do  you  think  the  wages  of  laboring 
men  are  higher  because  of  government  expenditures? 

MR.  BALDWIN:    Yes. 

PROFESSOR  SELIGMAN:  Then,  is  there  any  reason  why  he 
should  not  pay  a  certain  proportion,  according  to  his  ability;  or  should 
it  all  be  put  upon  the  land  owners? 

MR.  BALDWIN:  I  do  think  that  there  is  reason  why  wage 
earners  should  not  be  asked  to  pay  taxes  for  local  improvements,  be- 

296 


cause,  as  I  have  already  pointed  out  to  you,  he  pays  in  his  rent  a  full 
return  for  all  those  services. 

PROFESSOR  SELIGMAN:  But,  then,  if  the  taxes  were  taken 
off  buildings  would  he  then  pay  anything? 

MR.  BALDWIN:     He  would  pay  just  the  same;  yes. 

PROFESSOR  SELIGMAN:  If  the  taxes  were  taken  off  build- 
ings? 

MR.  BALDWIN :  If  the  taxes  were  taken  off  buildings  he  would 
pay  less  rent. 

PROFESSOR  SELIGMAN:     He  would  pay  less  rent? 

MR.  BALDWIN:  Yes,  but  still  he  would  pay  in  his  rent  the 
value  of  those  public  services  to  the  plot  of  land  that  he  occupied.  In 
expressing  an  opinion  concerning  the  eflfect  of  expenditures  of  govern- 
ment upon  wages,  I  fear  that  I  answered  too  quickly.  How  wages  arc 
affected  by  police  protection,  public  schools  and  expenditures  for  public 
improvements,  if  they  are  aflFected  at  all,  I  should  wish  to  study  care- 
fully before  making  an  answer. 

MR.  LEUBUSCHER:  The  Chairman  also  asked  you  about 
police,  schools,  hospitals,  and  such  like  facilities — if  there  were  no 
hospitals,  schools,  or  poHce,  etc.,  what  would  become  of  the  population 
of  New  York  City,  do  you  think? 

MR.  BALDWIN:  I  think  it  would  be  in  a  very  much  worse 
condition  than  now. 

MR.  LEUBUSCHER:    Would  it  decrease? 

MR.  BALDWIN:  As  it  would  be  a  less  advantageous  place  to 
live  in,  rents  would  go  down  and  the  people  would  move  away. 

MR.  LEUBUSCHER:    Would  land  values  go  down? 

MR.  BALDWIN :     If  the  rents  go  down  the  land  goes  down,  too. 

MR.  LEUBUSCHER:  The  land  owners  pass  the  tax  which  is 
levied  on  their  buildings  to  the  tenant  and,  therefore,  they  do  not  pay 
that  tax  to  the  city  except  as  a  collector  from  the  tenant—do  they? 

MR.  BALDWIN:  In  a  growing  community  the  tendency  is  to 
pass  it  on  to  the  tenant.  Whether  it  would  happen  the  day  after  you 
passed  the  act  or  not,  I  do  not  suppose  it  would  change  the  rent  that 
day,  but  it  would  tend  to  bring  more  land  into  use,  and  building  would 
increase  and  the  rents  would  go  down  and  the  tenants  would  save  the 
amount  of  the  taxes.  It  would  have  the  same  effect  if  the  cost  of 
building  material  were  reduced  and  the  carrying  charges  of  the  building 
were  much  less. 

TESTIMONY  OF  MR.  ALLAN   ROBINSON, 

President,  Allied  Real  Estate  Interests;  President,  City  and 

Suburban  Homes  Company. 

PROFESSOR  SELIGMAN :  Is  the  amount  of  land  actually  ripe 
for  building  and  held  out  of  use  a  negligible  quantity  in  this  city? 

MR.  ROBINSON:     It  is;  yes. 

297 


h 


s 


Ill 


I 


PROFESSOR  SELIGMAN:  In  your  opinion,  is  speculation  in 
land  a  good  thing  or  a  bad  thing  for  the  community? 

MR.  ROBINSON :  It  depends  on  what  you  mean  by  speculation. 
If  you  mean  the  purchase  of  land  with  a  view  of  holding  it  out  of  use 
and  with  a  view  of  distant  profits,  I  hardly  think  such  a  kind  of  specu- 
lation would  meet  with  my  approval.  But  what  I  call  advanced  build- 
ing is,  I  believe,  a  kind  of  real  estate  speculation  which  is  exceedingly 
important  to  the  community.  We  have  a  great  deal  of  advanced 
building,  so  called,  in  New  York  City  and  it  performs  very  much  the 
service  which  the  advocates  of  this  particular  kind  of  land  tax  think 
their  plan  would  accomplish.  It  is  building  in  advance  of  the  demand 
and  it  should  by  so  much  assist  in  relieving  congestion  and  in  a  num- 
ber of  other  things  which  really  benefit  the  community. 

PROFESSOR  SELIGMAN:  We  were  told  at  the  last  meeting 
that  the  expected  increase  in  the  value  of  the  land  is  an  important 
inducement  in  persuading  the  poor  man,  who  has  to  borrow  most  of  his 
money,  to  build.     Do  you  think  there  is  anything  in  that? 

MR.  ROBINSON :     Yes,  I  think  there  is  a  great  deal  in  that. 

PROFESSOR  SELIGMAN:  Does  the  average  builder  of  a  small 
house  own  in  this  city  to-day  anything  more  than  a  slight  equity  in 
his  proposition? 

MR.  ROBINSON:  Generally  speaking,  most  of  the  improved 
property  in  New  York  is  under  mortgage.  That  is  another  way  of 
answering  your  question. 

PROFESSOR  SELIGMAN:  Does  the  builder  hope  to  pay  off 
the  mortgage  primarily  out  of  surplus  earnings  or  surplus  income,  or 
does  he  expect  to  pay  it  off,  in  part  at  least,  out  of  the  increased  land 
values  when  he  comes  to  sell  that  property? 

MR.  ROBINSON:  It  is  the  expectation  that  the  appreciation  of 
the  land  value  will  largely  if  not  wholly  balance  the  depreciation  of 
the  building  value  that  leads  the  majority  of  the  people  to  invest  in 
land  in  a  large  city. 

PROFESSOR  SELIGMAN:  Would  the  transfer  of  the  tax  to 
land  diminish  the  inducement  to  build? 

MR.  ROBINSON:     Unquestionably. 

PROFESSOR  SELIGMAN:  Would  it  be  sufficient,  in  your  opin- 
ion, to  outweigh  the  advantage  which  would  come  from  the  exemption 
of  buildings  from  taxation  ?    What  would  be  the  net  result  ? 

MR.  ROBINSON:  That  would  largely  depend  upon  the  psycho- 
logical element;  that  is,  as  to  whether  prospective  owners  believe  that 
this  was  only  the  first  step  toward  the  entire  socialization  of  the  land, 
which  I  believe  it  to  be,  or  whether  it  would  end  right  there.  If  it 
would  end  right  there,  it  might  have  the  effect  of  establishing  a  new 
level  and  advance  building  might  start  from  that  point.  The  danger  is 
that  that  would  so  affect  the  public  mind  as  to  drive  people  out  of  that 
market,  which  is  a  market  just  as  much  as  the  grain  market  is  a  mar- 
ket and  every  other  commodity  market  is  a  market.  It  would  drive 
people  out  because  they  would  be  afraid  that  their  capital  would  be 
confiscated  by  a  further  progress  towards  land  socialization. 

298 


PROFESSOR  SELIGMAN :  We  have  been  told  on  the  one  hand 
that  this  change  would  cause  a  more  substantial  use  of  the  land.  We 
have  also  been  told  that  it  would  mean  a  somewhat  more  restricted  use 
of  gardens  and  breathing  spaces  in  the  suburbs.  On  the  other  hand, 
we  have  been  told  by  these  very  same  witnesses  that  this  change  in 
taaxtion  would  mean  a  lower  value  of  land — a  lower  selling  price  of 
land.  I  want  to  ask  you  whether,  in  your  opinion,  the  one  influence 
would  balance  the  other,  or  whether  we  should  have  more  land  to 
use  for  gardens,  or  the  same  amount  of  land  or  less  land,  as  a  result  of 
this  change  in  taxation  ? 

MR.  ROBINSON:  There  is  no  question  but  that  so  far  as  the 
city  is  concerned  there  would  be  more  compactness.  That  has  been 
the  result,  as  the  Haig  report  shows,  in  the  Canadian  cities.  They  have 
used  that  as  an  argument  in  fact  for  the  system. 

I  would  like  to  say  I  had  expected  that  this  movement,  of  which 
this  is  apparently  a  recrudescence,  had  about  passed  its  zenith.  I  felt 
quite  confident  that  a  year  or  two  ago  the  public  interest  in  it  had 
passed.  It  is  one  of  the  elements  which  has  tended  very  largely  to  the 
decrease  of  land  values  in  New  York  City  in  the  last  six  years. 

Three  years  ago  I  had  occasion  to  meet  the  man  who  decides 
whether  the  funds  of  individuals  in  Connecticut  shall  be  invested  in 
companies  and  corporations  in  New  York  City  and  in  other  cities.  He 
was  inclined  to  discourage  investments  of  Connecticut  funds  in  New 
York  City  real  estate  on  account  of  this  single-tax  movement.  I  told 
him  at  the  time  I  felt  that  the  movement  had  reached  its  zenith,  and 
was  going  down  and  that  the  investors  of  Connecticut  need  not  fear 
it.  I  cite  this  to  show  what  is  likely  to  happen  if  this  system  of  taxa- 
tion goes  into  effect. 

We  have  had  six  years  of  a  declining  real-estate  market.  I  feel 
that  we  are  on  the  verge  of  improvement  in  real  estate  values  in  New 
York  City.  The  city  needs  that  improvement — the  city  needs  it  in 
order  to  finance  its  various  measures.  I  should  be  extremely  sorry  if 
this  Committee  should  make  any  move  which  would  tend  to  give  any 
further  impetus  to  this  movement.  I  believe  New  York  City  is  on  the 
verge  of  a  large  increase  in  real  estate  values.  You  may  kill  it  if  you 
adopt  anything  like  this. 

DR.  WILCOX:  In  answer  to  Mr.  Seligman  you  discussed  the 
question  of  whether  the  effect  of  the  plan  would  be  to  diminish  the 
holdings  for  garden  spaces  inside  and  also  in  the  outer  part  of  the  city — 
the  thing  that  I  want  to  ask  is  how  can  you  get  an  intensity  of  use 
both  inside  and  outside,  that  is  at  the  center,  and  at  the  same  time,  in 
all  the  outlying  sections? 

MR.  ROBINSON:     You  cannot;  but  you  can  get  the  tendency. 

I  do  not  say  there  would  be  no  gardens.  I  do  say  the  tendency 
towards  compactness  in  any  one  given  locality  in  the  city  will  be 
greater  than  it  is  to-day,  and  as  a  result  the  drawing  power  will  be 
greater  than  to-day. 

DR.  WILCOX:  Would  the  effect  of  this  system,  do  you  think, 
be  the  shortening  of  rapid  transit  lines  that  run  out  into  the  suburbs^ 
so  that  people  could  not  go  so  far  out? 

MR.  ROBINSON:  Of  course;  that  follows  if  I  am  on  the  right 
tendency — naturally. 

299 


DR.  WILCOX:     It  would  not  cut  off  any  that  are  actually  built? 

MR.  ROBINSON:     It  might  seriously  affect  them. 

DR.  WILCOX:  Can  the  transfer  of  tax  from  the  buildings  to 
land  ever  increase  the  value  of  improved  land?  Neglecting  for  the 
moment  the  indirect  effects  which  arise  through  the  stimulation  of  other 
forces,  how  could  the  land  with  the  building  on  it,  where  the  operating 
expenses  chargeable  to  taxes  are  reduced,  for  example,  from  $2,000  to 
$1,200 — how  could  it  escape  from  an  increase  in  value?  The  total  tax 
upon  the  parcel  is  decreased,  but  the  tax  which  the  assessor,  according 
to  the  scheme  worked  out,  writes  on  his  books  opposite  the  land 
value,  has  increased.  What  is  the  effect  of  the  fact  that  the  total  tax 
upon  that  parcel  has  decreased? 

MR.  ROBINSON:  My  theory  is  this:  If  you  increase  the  tax 
upon  land  you  decrease  the  value  of  the  land  by  the  amount  of  the  taxes 
capitalized.  On  the  other  hand,  if  you  decrease  the  tax  upon  the  land 
you  increase  the  value  of  the  land  by  the  amount  of  the  taxes  capital- 
ized. If  the  tax  upon  the  land  as  distinguished  from  the  improvement 
is  a  heavier  tax  the  land  value  will  not  be  higher. 

DR.  WILCOX:     It  will  not  be  higher— will  it  be  lower? 

MR.  ROBINSON:     The  land  value? 

DR.  WILCOX:     Yes. 

MR.  ROBINSON:     Lower— of  course  it  will. 

DR.  WILCOX:     Will  rents  decrease? 

MR.  ROBINSON :  I  presume  that  theoretically  at  the  beginning 
— perhaps  the  first  year  or  so — there  will  be  a  decrease  of  rents  as  the 
result  of  a  movement  of  this  sort.  I  presume  that  if  we  had  a  panic  in 
real  estate  that  real  estate  values  quite  generally  would  decrease  and 
there  would  be  a  decrease  in  rents. 

DR.  WILCOX:  Don't  you  think  that  would  be  presuming  too 
much? 

MR.  ROBINSON:    No. 

DR.  WILCOX:  It  is  the  improvements  that  make  the  value  of 
the  land  and  the  rents  that  you  get? 

MR.  ROBINSON:  This  is  another  thing  that  I  wanted  to  say- 
rents  are  not  what  the  landlords  can  get.  They  are  what  the  tenants 
will  pay.  The  landlord  is  a  beggar  and  he  takes  what  the  tenant  will 
give,  but  no  more. 

MR.  LEUBUSCHER:  You  said  the  landlord  will  take  whatever 
the  tenants  offer  him? 

MR.  ROBINSON:    Yes. 
MR.  LEUBUSCHER:     Are  you  a  landlord? 

MR.  ROBINSON:  I  am  president  of  the  City  and  Suburban 
Homes  Company,  which  has  15,000  tenants. 

MR.  LEUBUSCHER:  For  your  information  I  will  state  this: 
A  member  of  this  Committee  is  a  landlord  and  he  will  not  take  what 
his  tenants  offer  him.  If  they  don't  pay  the  rent  he  asks  he  says :  '  Get 
out."    Now,  there  is  one  landlord  in  New  York  who  will  not  take  what 

300 


the  tenants  offer.  In  fact,  I  could  mention  an  instance  of  another  land- 
lord, Rogers,  Peet  &  Company,  who  are  the  landlords  of  my  offices — 
where  I  have  an  office.  When  my  lease  expired  I  offered  them  less 
rent,  but  they  would  not  accept  it.  I  said  I  would  not  pay  more  and 
they  said  they  would  lease  it  to  somebody  else.  I  stayed  and  paid  the 
rent  they  asked. 

MR.  ROBINSON :     You  were  willing  to  pay  the  rent. 

MR.  LEUBUSCHER:     Of  course;  I  had  to. 

TESTIMONY   OF   DR.   ROBERT   H.   WRITTEN. 

DR.  WHITTEN:  I  am  opposed  to  the  proposed  halving  of  the 
tax  on  buildings.  It  would  not,  in  my  opinion,  be  of  any  value  to  the 
rent  payer  or  home  owner,  but  would  cause  injustice  as  between  tax- 
payers and  would  result  in  an  unsettlement  of  real  estate  conditions 
Both  sides  to  this  controversy,  I  believe,  accepted  as  settled  and  not 
open  to  serious  discussion  the  fundamental  assumption  that  while  a 
tax  on  land  cannot  be  shifted,  a  tax  on  the  building  tends  to  be  shifted 
to  the  tenants.  I  cannot  agree  that  the  tax  on  the  building  is  paid  by 
the  tenant.  Generally  speaking,  I  believe  that  both  the  tax  on  the  build- 
ing and  the  tax  on  the  land  are  paid  out  of  ground  rent  and  therefore 
serve  to  reduce  the  market  value  of  the  land  and  do  not  result  in  the 
payment  of  a  higher  rent  by  the  user  of  the  property.  This  statement 
doubtless  seems  heretical,  but  its  truth  or  falsity  is  of  such  fundamental 
importance  to  this  entire  problem  that  it  may  repay  careful  considera- 
tion. 

The  generally  accepted  theory  in  regard  to  the  incidence  of  the  tax 
on  real  estate  is  well  stated  by  Dr.  Haig  in  his  valuable  report  to  this 
Committee.     Dr.  Haig  says  (at  pp.  125-126)  : 

It  is  generally  agreed  that  a  charge  which  is  levied  upon  city  land  values 
must  be  deducted  by  the  land  owner  from  the  sum  he  already  receives  from  his 
site.  He  is  already,  theoretically,  collecting  all  he  can  collect  from  the  tenant — 
the  equivalent  of  the  advantages  his  site  possesses  over  others  under  the  condi- 
tions obtaining.  The  heavier  tax  apportioned  according  to  land  values,  it  may 
be  claimed,  would  affect  these  conditions.  It  certainly  will  not  decrease  the 
number  of  sites.  *  *  *  It  follows  that  land  taxes  tend  to  be  borne  by  the 
payer.     There  is  no  shifting.     The  resting  place  is  with  the  owner. 

The  incidence  of  the  tax  on  buildings  is  different.  The  new  tax  is  a  charge 
connected  with  supplying  improvements  on  land  to  those  who  desire  them.  The 
person  who  supplies  the  improvements  is  the  capitalist.  He  can  place  his  capital 
here  or  place  it  elsewhere.  To  place  it  here  he  must  be  given  the  same  return 
which  he  should  receive  elsewhere.  Placing  his  capital  here  involves  the  pay- 
ment of  a  tax  charge  which  can  usually  be  avoided  if  he  places  it  elsewhere.  The 
person,  therefore,  who  wishes  the  improvement  on  land  rnust  meet  this  charge  in 
order  that  this  option  by  the  capitalist  may  be  as  attractive  as  the  other.  Taxes 
on  buildings  and  other  improvements  which  wear  out,  tend,  therefore,  to  be 
shifted  to  the  tenant. 

The  fallacy  of  this  line  of  reasoning  is  due  to  two  main  causes: 
First,  in  failure  to  recognize  that  the  land  and  its  appropriate  improve- 
ments cannot  be  separated  in  determining  the  value  of  the  land  or  the 
incidence  of  the  land  and  building  tax ;  and  second,  in  failure  to  realize 
the  real  tactical  weakness  of  the  land  owner  as  compared  with  the 
builder,  investor  or  tenant  in  the  effort  to  shift  the  tax. 

Often  in  considering  this  question  the  assumption  seems  to  be  that 
city  land  has  a  site  value  that  has  little  or  no  relation  to  its  use  or  to 
the  building  that  must  be  erected  in  order  that  it  may  be  appropriately 

801 


iii 


'i! 


utilized.  This  leads  to  the  assumption  that  the  land  and  its  appropriate 
improvement  are  entirely  separate  investments  and  need  not  be  consid- 
ered as  a  unit  in  considering  the  value  of  the  site,  and  the  incidence  of 
the  tax  on  the  land  and  building.  Land  in  a  city  has  value  only  because 
of  what  it  can  earn  for  its  owner  when  improved  with  an  appropriate 
building.  The  value  of  a  particular  plot  of  land  that  is  ripe  for  improve- 
ment is  determined  solely  by  the  estimated  surplus  rental  that  would 
remain  after  paying  interest  on  the  cost  of  the  appropriate  building, 
rent  collection,  repairs,  operation  and  taxes  on  the  land  and  building. 
/This  surplus  rental  is  capitalized  as  the  value  of  the  land.  The 
land  is  the  residual  claimant.  All  expenses  incident  to  the 
construction  and  operation  of  the  appropriate  building  must  be 
deducted  and  the  remainder  is  capitalized  as  the  value  of  the  land. 
The  market  value  of  land  ripe  for  improvement  is  determined  by  esti- 
mated surplus  earnings  when  appropriately  improved.  The  market 
value  of  land  not  yet  ripe  for  improvement  is  determined  by  anticipated 
surplus  earnings  when  appropriately  improved,  discounted  by  carry- 
ing charges,  i.  e.,  taxes  and  interest,  until  such  land  will  be  ripe  for 
improvement.  As  the  land  is  a  residual  claimant  to  profits  any  taxes 
that  will  be  levied  upon  the  building  essential  to  its  suitable  improve- 
ment and  use  must  be  deducted.  The  tax  on  the  building  is  therefore 
shifted  to  the  land  and  tends  to  reduce  its  market  value  in  the  same 
way  as  a  tax  levied  directly  against  the  land. 

It  is  true  that  a  tax  on  buildings  cannot  reduce  the  returns  on  the 
capital  required  to  provide  additional  buildings,  for  in  that  case  capital 
would  seek  other  forms  of  investment.  It  is  also  true  that  the  builder 
must  see  an  opportunity  for  a  profit.  The  two  remaining  parties  to 
whom  the  burden  of  the  building  tax  may  possibly  be  shifted  are  the 
future  tenants  and  the  present  land  owners.  Which  of  these  possible 
victims  occupies  the  weaker  tactical  position?  Undoubtedly  the  present 
land  owner.  The  present  land  owner  whose  property  is  dead  ripe  for 
improvement  will  lose  money  unless  he  sells  or  improves.  If  he  sells 
he  must  sell  at  such  a  price  that  the  builder  and  investor  can  get  a  fair 
return.  The  tax  on  the  appropriate  building  will  therefore  reduce  the 
price  he  can  get  for  his  land.  It  will  not  affect  the  builder,  investor  or 
tenant.  There  is  always  enough  land  dead  ripe  for  improvement  and 
enough  owners  who  either  realize  this  situation  or  that  they  have  other 
more  urgent  uses  for  their  money  to  make  the  market  value  of  land 
fluctuate  with  the  estimated  net  returns  that  can  be  anticipated  from  its 
improvement.  A  permanent  increase  in  the  tax  rate  on  buildings  with- 
out corresponding  decreases  in  the  tax  rate  on  land  means  a  loss  to 
present  land  owners  in  the  value  of  their  holdings.  A  permanent  de- 
crease in  the  tax  rate  on  buildings  without  a  corresponding  increase  in 
the  tax  rate  on  land  means  a  gain  to  present  land  holders  in  the  value 
of  their  holdings. 

Land  as  the  residual  claimant  to  excess  profits  from  the  improve- 
ment and  use  of  real  estate  reach  the  gain  or  loss  incident  to  the 
decrease  or  increase  in  the  tax  rate.  There  are  always  builders  and 
permanent  investors  ready  to  supply  needed  accommodations  if  they 
can  anticipate  a  fair  return  on  their  investments,  and  there  is  always 
land  dead  ripe  for  improvements  that  can  be  bought  at  a  price  that 
will  make  it  possible  to  earn  this  fair  return,  in  spite  of  any  moderate 
increase  in  the  tax  on  the  improvement. 

S02 


An  increase  in  the  tax  rate  on  buildings  cannot  immediately  affect 
the  tenant,  as  it  does  not  affect  the  existing  supply  of  buildings.  It 
does,  however,  immediately  affect  the  land  owner.  For  owners  holding 
land  that  is  dead  ripe  for  improvement  are  forced  by  economic  necessity, 
i.e.,  the  fear  of  greater  loss,  to  sell  at  a  price  that  will  make  possible  its 
improvement  with  a  profit  to  the  builder  and  a  fair  return  to  the  perma- 
nent investor.  The  increased  tax  on  the  building  is  discounted  at  once 
in  the  value  of  the  land.  Conversely  a  decrease  in  the  tax  on  the  build- 
ing will  be  reflected  in  an  increase  in  the  value  of  the  land. 

The  land  and  its  appropriate  improvement  cannot  be  separated  in 
determining  the  value  of  the  land  or  the  incidence  of  the  land  and 
building  tax.  Failure  to  recognize  this  has  led  to  confusion.  The 
value  of  the  land  is  determined  by  what  it  will  earn  when  appropriately 
improved.  It  is  the  surplus  earnings  of  the  land  and  the  building  that 
are  capitalized  as  the  value  of  the  land.  Anything  that  affects  the 
amount  of  the  surplus  that  can  be  earned  by  the  land  and  the  suitable 
building  affects  the  value  of  the  land. 

In  1903  the  tax  rate  in  Manhattan  was  1.41,  while  the  tax  rate  for 
the  current  year  is  1.86.  During  this  period  there  has  been  a  large 
increase  in  the  population.  Yet  it  is  generally  stated  that  during  this 
period  of  increasing  taxes  and  of  increasing  population  rents  have,  in 
general,  declined.  In  the  city  of  Washington  the  tax  rate  is  about  half 
of  what  it  is  in  most  other  cities,  owing  to  the  fact  that  the  United 
States  Government  pays  half  the  cost  of  the  city  government.  Rents 
in  Washington,  however,  are  not  cheaper  than  in  the  cities  where  the 
tax  rate  is  much  higher. 

In  conclusion  I  will  say:  The  present  tax  on  buildings  like  the 
present  tax  on  land  has  been  discounted  in  the  market  value  of  the  land 
and,  generally  speaking,  has  not  affected  the  rent  paid  by  the  tenant. 

The  transference  of  the  tax  from  the  building  to  the  land  would 
not  in  general  affect  rents  but  would  cause  injustice  as  between  exist- 
ing land  owners  and  unless  it  is  gradually  effected  would  cause  an  un- 
settlement  of  real  estate  conditions. 

PROFESSOR  SELIGMAN:  Do  we  understand  your  conclusion 
to  be  this:  That  the  theory  of  incidence  which  has  been  usually  fol- 
lowed by  both  sides  to  the  controversy  is  erroneous;  and  that,  in  your 
opinion,  the  proposed  scheme  is  a  bad  one,  because  it  would  not  help 
the  tenant  and  would  injure  the  owners? 

DR.  WRITTEN:  I  think  that  is  a  correct  statement  of  my  posi- 
tion. 

MR.  LEUBUSCHER :  Do  you  think,  Mr.  Whitten,  that  experience 
is  a  better  teacher  than  all  our  theorizing? 
DR.  WHITTEN:     Yes. 

MR.  LEUBUSCHER:  Do  you  think  that  your  theory  that  there 
will  be  no  reduction  in  rents  will  be  somewhat  modified  if  you  became 
aware  of  the  fact  that  when  Houston,  Texas,  adopted  a  modified  part  of 
this  scheme,  rents  fell  from  one-fifth  to  one-sixth. 

DR.  WHITTEN:  If  I  could  be  assured  that  was  the  only  cause 
that  affected  rents. 

MR.  LEUBUSCHER:  As  I  understand  it,  you  run  counter  to 
the  accepted  theory  of  all  economists  when  you  say  that  the  tax  on 
buildings  is  not  shifted? 

803 


i 


mi 


DR.  WRITTEN :  Yes,  the  tax  on  the  building  cannot  as  a  gen- 
eral thing  be  shifted  to  the  tenant. 

MR.  LEUBUSCHER :     I  take  issue  with  you  on  that 
MR.  WILCOX:     With   reference   to   the   harm   that   this   system 
would  bring  about  to  the  land  owners,  I  understand  that  that  harm 
consists  in  the  shifting  of  values  from  one  person  to  another. 

DR.  WRITTEN:  Yes.  As  I  have  stated,  I  think  that  the  tax 
on  the  building  is  in  general  discounted  at  present  in  the  value  of  the 
land.  But,  as  Dr.  Haig  has  shown  in  his  report,  the  ratio  between  the 
value  of  the  building  and  the  value  of  the  land  in  different  parts  of  the 
city  is  different,  so  that  the  imposition  of  the  entire  tax  upon  the  land 
would  affect  different  land  owners  differently,  and  so  result  in  the 
shifting  of  land  values  to  compensate  for  that  difference  in  the  tax 
burden  on  different  parties. 

TESTIMONY   OF  MISS   GRACE  ISABEL  COLBRON, 

Secretary,  Women's  Henry  George  League;  Vice-President,  Women's 

Society  to  Lower  Rents  and  Reduce  Taxes  on  Homes;  Field 

Lecturer,  Henry  George  Lecture  Association. 

MISS  COLBRON:  On  the  second  day  Mr.  Leubuscher  asked  if 
there  were  a  difference  in  the  value  of  labor  products  say,  in  the  price 
of  beefsteak,  in  the  city  as  compared  with  the  country.  As  a  matter 
of  fact,  in  smaller  towns  food  prices  are  higher  than  they  are  in  New 
York  City.  The  same  is  true  of  prices  of  clothing,  furniture,  etc.,  for 
goods  of  equal  quality.  In  other  words,  the  price  of  labor  products  is 
lowered  by  the  growth  of  population,  in  contrast  to  land  values,  which 
are  raised  by  the  same  cause.  The  return  to  merchants  selling  food  in 
New  York  at  a  lower  cost  is,  of  course,  greater  because  of  the  larger 
market ;  but  is  not  this  a  clear  case  of  site  value,  locational  value,  land 
value?  This  point  struck  me  as  important  because  it  shows  the  import- 
ance to  the  purchasing  public,  to  the  general  public,  of  any  influence 
of  taxation  methods  on  the  cost  of  living. 

In  New  York  City  we  have,  through  a  separate  assessment  bill, 
legally  recognized  the  difference  between  the  bare  value  of  land  and  the 
value  of  the  improvements  thereon.  The  opponents  of  the  measure  now 
being  discussed  before  the  Committee  continually  reiterate  that  real 
estate  is  already  overburdened.  We  who  believe  in  the  proposed  meas> 
ure  agree  that  the  improvement  side  of  real  estate  is  undoubtedly  over- 
burdened. But  our  opponents  do  not  emphasize  the  fact,  when  they 
talk  about  it,  that  we  are  trying  to  take  the  burden  off  that  portion  of 
real  estate  in  which  the  general  public  is  more  intimately  concerned. 
Therefore,  when  our  opponents  speak  of  the  burden  of  taxation  on 
real  estate,  they  should  say  what  they  mean.  Their  unclear  statements 
confuse  the  public  and  are  unfair  in  that  it  puts  an  extra  burden  on  us 
of  explanation  as  to  what  we  really  propose  to  do. 

I  have  listened  very  carefully  to  what  has  been  said  at  the  hearings 
but  I  have  not  been  able  to  accept  any  argument  as  yet  given  that  the 
reduction  of  the  tax  on  improvements  would  not  materially  reduct 
rents.  If  you  will,  therefore,  allow  me  to  accept  that  premise,  I  should 
say  that  a  reduction  of  rent  to  the  average  tenant  would  prove  a  very 
good  thing  in  this  city,  in  fact  it  would  come  back  to  the  whole  city  m 

304 


mcreased  land  values  in  another  way  than  the  way  that  has  been 
spoken  of  here  The  less  rent  the  average  individual  pays,  the  more 
money  he  has  left  over  for  other  expenses.  That  means  bigger  busi- 
ness to  the  food  and  clothing  merchants,  a  greater  incentive  for  them 
to  settle  m  more  scattered  districts,  a  greater  incentive  to  buy  better 
stock,  bringmg  it  back  to  the  wholesaler  again,  and  a  greater  incentive 
to  the  wholesaler  to  order  from  the  manufacturer.  All  of  this  means 
more  busmess  and  mcreases  land  values,  and  is,  therefore,  of  benefit  even 
to  the  land  owner.  As  far  as  it  has  been  done  in  Vancouver  the  land 
owner  has  seen  this  point  and  is  in  favor  of  the  present  method  of 
taxation,  that  is  as  far  as  the  exemption  on  improvements  is  concerned 
In  fact,  some  of  the  Canadian  towns  show  higher  land  values  than 
any  other  towns  of  similar  size  can  show  here,  and  this  on  the  basis 
of  the  fact  that  capital  invested  in  productive  enterprises  will  not  be 
taxed. 

There  has  been  much  talk  about  the  growth  of  the  city.  It  is 
true  that  if  you  cheapen  the  price  of  land  you  lower  its  speculative  value 
to  the  individual,  but  I  do  not  see  how  this  can  lower  its  use  value. 
Anything  that  tends  to  bring  capital  to  a  city,  and  certainly  the  untax- 
ing of  capital  invested  in  productive  business,  and  the  untaxing  of  im- 
provements must  attract  capital,  anything  of  this  kind  would  raise  the 
rental  value  of  city  land  because  it  would  make  that  land  more  de- 
sirable. People  will  naturally  flock  to  a  city  where  their  rents  are 
lower  and  their  opportunities  of  return  on  capital  invested  in  business 
are  higher. 

Naturally,  in  a  new  city,  which  has  yet  to  grow,  the  city  would 
grow  more  compact  at  its  center  by  making  it  easier  to  get  land  and  by 
making  it  more  profitable  for  capital  to  put  up  buildings  there.  But  is 
that  not  what  every  city  wants?  In  New  York,  we  have  already  built 
up  our  center  more  or  less  compactly.  I  have  not,  as  yet,  heard  any 
argument  refuting  my  belief  that  in  New  York  City  a  very  large  effect 
of  the  new  method  of  taxation  would  be  to  spread  out,  to  encourage  the 
building  of  homes  in  the  periphery  of  the  city,  to  encourage  transit 
facilities  for  those  living  outside  of  the  city,  because  that,  for  our  city, 
would  be  the  line  of  least  resistance,  the  line  of  natural  growth  which 
can  be  taken  under  a  better  method  of  taxation. 

It  is  a  truism,  of  course,  that  taxes  on  improvements  tend  to  re- 
strict improvements,  and  I  have  not  as  yet  heard  anything  to  refute 
this  or  to  refute  the  assertion  that  the  reduction  of  the  tax  on  improve- 
ments would  cause  more  improvements  in  this  city — something  any 
city  desires. 

PROFESSOR  SELIGMAN :  If  rents  are  reduced  will  wages  be 
reduced  ? 

MISS  COLBRON:    I  cannot  think  that  they  would  be. 

PROFESSOR  SELIGMAN:  Then  you  do  not  think  that  high 
rents  and  high  wages  go  together?  You  disagree  with  Mr.  Baldwin 
in  that  case? 

MISS  COLBRON :    I  am  afraid  that  I  do— in  that  case. 


J  t 


li 


I 


305 


ll 


\\ 


STATEMENT  OF  MR.  LAURENCE  M.  D.  McGUIRE, 

President,  Real  Estate  Board  of  New  York. 

PROFESSOR  SELIGMAN :  Mr.  McGuire,  our  next  speaker,  was 
unfortunately  called  away.  He  has  left  a  statement  here  which  I  would 
ask  our  Executive  Secretary  to  read,  in  lieu  of  his  testimony. 

MR.  TANZER  (Reading):  There  should  be  only  one  theory 
as  a  basis  for  taxation  throughout  the  whole  state.  The  Committee, 
m  my  opinion,  should  not,  under  any  circumstances,  recommend  any 
theory  as  a  basis  of  taxation  which  would  be  different  in  the  City  of 
New  York  from  any  part  of  the  state.  The  Real  Estate  Board  has  made 
a  complete  statement  covering  all  the  points  raised  by  the  Mayor's 
Committee.  This  answer  has  been  filed  with  the  Committee  and  I 
concur  in  all  the  opinions  expressed.  The  Mayor's  Committee  can 
only  recommend.  Legislation  will  be  required  to  put  into  effect  what- 
ever it  may  recommend.  The  Legislature  has,  perhaps  a  half-dozen 
times,  rejected  the  theory  of  removing  the  tax  on  buildings  and  placing 
it  on  land.  It  is  to  be  hoped  that  the  Committee  will  not  include  this 
theory  in  its  report.  The  theory  has  not  the  support  of  practical  per- 
sons, who  consider  it  both  fallacious  and  dangerous.  It  is  unfortunate 
that  the  Committee  has  seen  fit  to  emphasize  the  proposition  by  giving 
it  such  serious  consideration  as  is  evidenced  by  these  hearings,  for  the 
mere  fact  that  it  is  being  given  consideration  has  a  depres.sing  effect 
upon  the  real  estate  market. 

All  are  agreed  that  the  tax  burden  on  real  estate  is  now  entirely 
too  high.  The  Committee  can,  therefore,  best  serve  the  public  inter- 
ests by  applying  itself  to  a  search  for  new  sources  of  revenue  and 
recommending  that  such  new  revenue  as  can  he  found  be  applied  to  the 
general  purposes  of  government,  and  not  used  for  activities  which  have 
no  place  in  a  proper  governmental  system.  It  seems  inconceivable 
that  additional  burdens  should  be  considered  for  real  estate  when  the 
purpose  should  be  to  reduce  the  tax  rate  to  a  fair  and  reasonable  point, 
that  is,  two  per  cent,  or  less.  Two  per  cent,  is  the  limit  real  estate  in 
the  city  should  be  asked  to  bear.  It  is  sincerely  to  be  hoped  that  the 
Mayor's  Committee  will  include  in  its  recommendations  some  feasible 
plan  through  which  those  living  outside  of  the  city  and  doing  business 
in  the  city — the  commuting  element— will  be  compelled  to  contribute 
a  just  and  fair  proportion  to  the  cost  of  government. 


TESTIMONY  OF  MR.  JAMES  R.  BROWN, 
President,   Manhattan   Single  Tax   Club. 

MR.  BROWN:  We  are  at  odds  with  the  present  method  of  rais- 
ing public  revenue.  We  say  that  there  is  no  principle  of  business, 
honor,  morality,  or  of  economics,  recognized  in  our  present  method  of 
raising  public  revenue.  We  take  private  property  for  public  use  and 
we  give  public  value  for  private  enjoyment.  Those  who  do  good  we 
punish.    Those  who  do  evil  we  reward. 

Taxation  is  payment  for  social  service.  A  man  ought  to  pay  taxes 
as  he  pays  for  dry  goods  or  groceries.  In  other  words,  he  should  pay 
for  what  he  gets  from  society  and  not  for  what  he  does  for  himself. 
For  instance,  under  our  law  if  a  man  paints  a  house  we  are  supposed 

306 


to  tax  him.  The  law  demands  that  all  property  be  assessed  at  its  full 
and  true  value.  It  is  evident  to  us  all  that  a  painted  house  is  of  more 
value  than  an  unpainted  house.  That  brings  us  into  another  wrong 
principle  which  is  mvolved ;  for  the  painting  of  a  house  is  a  service 
not  rendered  by  society  to  that  individual,  but  a  service  rendered  by 
that  individual  unto  himself ;  and,  therefore,  to  charge  a  man  for  services 
that  he  renders  to  himself  is  dishonest,  unbusinesslike,  and  is  nothing 
but  a  punishment  for  doing  good. 

On  the  other  hand,  those  things  that  could  be  directly  regarded  as 
services  on  the  part  of  society  to  the  individual  member  of  the  com- 
munity, they  are  all  registered  in  what  we  call  land  value,  and  that,  and 
that  alone,  is  the  true  measure  of  the  value  of  social  service. 

There  is  no  reason  for  all  the  consideration  we  have  been  givine 
land  speculators.  He  is  not  essential  in  the  scheme  of  things  at  all. 
He  seeks  to  gather  where  he  does  not  sow,  to  get  something  for  noth- 
ing, to  profit  not  by  labor  on  his  part,  but  by  a  careful  development  of 
society  and  the  expenditure  of  public  revenue  for  public  utilities.  In 
other  words,  by  allowing  land  value  to  get  into  private  pockets.  We 
are  putting  a  premium  on  idleness  and  making  payment  to  men  known 
as  land  speculators,  for  holding  land  out  of  use,  therebv  making  land 
artificially  scarce  and  artificially  dear  and  adding  to  the  burdens  of 
labor  and  of  capital. 

What  is  land  value?  A  personal  creation?  Can  even  the  whole 
Board  of  Real  Estate  Brokers  say  that  they  created  the  land  values  of 
New  York?  Certainly  not!  It  is  due  to  the  presence  of  society  and 
the  public  utilities  that  we  paid  for  socially.  It  is  reflected— it  is  a 
measure  of  the  advantage  of  social  pressure  and  service.  Get  rid  of 
your  fire  department  and  what  happens  to  land  values?  They  will  go 
down.  Get  rid  of  your  police  department  and  land  values  will  go  down. 
Nothing  but  land  values  reflect  the  advantage  of  social  presence  and 
social  activity. 

Under  our  present  method  of  taxation  what  is  the  result  to  the 
business  interest  of  the  city  and  to  the  capital  interest  of  the  city?  The 
assessed  value  of  improvements  on  land  is  only  three  billion  dollars. 
If  it  earned  5  per  cent,  to-day,  which  it  is  not  earning  as  a  fact— the 
total  earning  of  the  capital  upon  Manhattan  Island— Greater  New  York- 
would  be  only  $150,000,000.  The  untaxed  value  of  the  lands  alone  of 
Greater  New  York  is  over  eight  billion  dollars,  which,  at  5  per  cent., 
would  make  a  tribute  or  burden  carried  by  capital  and  labor  of  $400,- 
000,000.  Land  value  is  the  value  of  the  opportunity  to  produce  wealth-^ 
to  do  business,  and  our  tax  system  has  encouraged  the  boosting  and 
booming  to  the  terrible  condition  where  the  land  values  are  $5,000,000,- 
000  greater  than  the  sum  total  of  the  labor  values,  the  capital  and  the 
wealth  on  the  land  of  this  city,  what  does  it  mean?  It  accounts,  and 
it  alone  can  account,  for  the  lower  rate  of  interest  on  working  capital 
and  the  miserable  revenue  for  labor.  It  accounts  for  the  fact  that 
business  men  have  to  struggle  to  keep  ahead  of  the  sheriff.  Because  of 
the  present  tax  system  it  makes  it  more  profitable  to  hold  land  than 
to  use  land.  Land  values  have  been  boosted  to  a  point  where  labor  and 
capital  can  barely  live. 

We  believe  that  there  is  no  difficulty  in  obtaining  revenue  for  New 
York  City  if  we  only  had  the  brains  and  the  nerve  to  go  after  our  own 
property  and  take  what  belongs  to  the  people  socially  and  what  they 
have  created  socially  and  which  they  have  given  over  to  the  land  specu- 

307 


I 


I 


\ 


lators.  What  particular  advantage  to  the  community  are  these  so- 
called  land  speculators?  Are  they  producers?  Not  at  all.  Do  they 
cause  two  blades  of  grass  to  grow  where  hitherto  only  one  has  grown? 
No.  Do  they  put  up  buildings?  No.  Do  they  manufacture  goods? 
No.  Do  they  render  any  service?  No.  Not  in  any  way  are  they  an 
advantage  to  the  community. 

Why,  we  have  so  much  natural  revenue  here  there  should  be  no 
problem  of  debt.  If  the  Constitution  stands  in  the  way — well,  we  could 
very  easily  fix  the  Constitution.  Law  is  the  most  convenient  thing 
ever.  What  is  legal  to  do  to-day  is  illegal  to-morrow.  What  should 
be  considered  in  a  discussion  of  the  tax  problem  is  the  ethics  of  the 
situation.  If  we  build  our  system  upon  sound  ethics  it  will  work  out 
absolutely  all  right. 

What  we  need  here  in  this  city  is  cheaper  land.  We  have  a  large 
amount  of  it.  It  ought  to  be  cheap,  because  there  is  so  much  of  it  and 
so  few  of  us.  It  ought  to  be  as  cheap  as  dirt.  We  have  a  million  vacant 
lots  in  New  York  City.  If  you  want  a  small  piece  of  land  here  you  have 
got  to  pay  a  King's  ransom  for  it.  Remember  this,  that  every  cent  of 
land  values  that  goes  to  a  private  person  is  a  tribute  paid  by  labor 
and  capital  and  given  to  those  who  produce  it  not,  and  who  are  not  in 
any  way  related  to  the  development  of  it. 

A  simple,  plain,  comprehensive,  eflfective  method  of  raising  public 
revenue  would  be  this :  I  would  take  for  the  use  of  society  to  the  last 
cent  that  value  that  society  alone  produces,  the  result  of  presence  of 
society,  the  social  activities  and  services  that  society  renders.  Then,  by 
doing  that  you  would  not  be  charging  a  man  dishonestly  but  honestly 
for  that  service  he  gets  from  society.  What  is  the  measure  of  what 
he  gets?  The  value  of  the  land  of  which  he  has  sole  and  exclusive 
possession  is  the  only  and  the  true  measure  of  the  value  of  the  social 
service.  When  you  charge  him  on  any  other  basis  you  are  robbing  the 
citizens  of  private  property.  When  you  do  not  charge  him  you  are 
giving  to  that  private  individual  public  property. 

PROFESSOR  SELIGMAN:  I  would  like  to  know  what  your 
theory  of  taxes  is  on  this  point:  Do  you  think  that  from  the  point  of 
view  of  sound  ethics  it  is  proper  by  the  introduction  of  this  system  to 
take  away  from  the  capital  invested  by  this  man  in  real  estate  a  certain 
proportion  of  his  property?    That  is  my  only  point. 

MR.  BROWN :  Yes,  for  this  reason :  We  are  taking  for  the  use 
of  society. 

TESTIMONY  OF  MR.  E.  A.  TREDWELL, 

Member,  Legislation  and  Taxation  Conunittee,  Real  EsUte  Board  of 

New  York. 

PROF.  SELIGMAN:  How  large  a  proportion  of  real  estate  is 
owned  by  people  who  have  put  their  earnings  into  real  estate  within 
the  last  ten  years? 

MR.  TREDWELL:  In  Chicago  they  found  that  by  actual  statis- 
tics that  on  an  average  every  piece  of  real  estate  in  the  city  changed 
hands  every  27  years ;  so  that  probably  the  same  relative  change  would 
occur  here.  Recent  conditions  have  been  severe  regarding  real  estate. 
It  is  not  generally  considered  a  desirable  security  to-day,   therefore, 

308 


values  have  dropped  severely,  the  income  from  it  has  been  poor  and 
conditions  have  been  bad.  It  always  seems  to  have  been  a  target  for 
all  kinds  of  reforms  including  the  idea  of  halving  the  tax  rate  on  build- 
ings which  is  a  measure  for  social  reform  and,  therefore,  should  not  be 
saddled  on  the  taxing  power  as  that  is  contrary  to  every  doctrine  ever 
found  sound,  I  think,  by  economists. 

I  want  to  point  out  to  you  that  the  tax  on  land  to-day  in  the  City 
of  New  York  amounts  to  what  was  a  war  tax  in  ancient  Rome.  You 
will  find  that  the  war  tax  at  the  time  of  Trajan  was  twenty-five  per 
cent,  of  the  net  income.  It  is  35%  of  the  income  in  New  York  City 
to-day.  Real  estate  owners  have  been  referred  to  as  practically  graft- 
ing on  the  public.  Now  the  grafting  is  not  amongst  the  big  ones- 
Real  estate  men  or  otherwise,  the  usual  targets  of  social  reformers.  You 
are  bringing  up  a  population  in  New  York  City  to-day  where  moral 
fibre  is  growing  so  weak,  so  feeble,  that  to  conquer  it  is  but  a  boy\s 
task  at  any  time  and  it  is  the  kind  of  men  you  are  bringing  up  here 
that  are  going  to  be  a  peril  to  this  republic.    They  are  the  real  grafters. 

A  man  don't  value  anything  that  he  does  not  make  or  achieve 
through  work  with  his  own  hands.  It  is  not  mere  money  that  we 
must  think  of;  we  must  think  more  in  terms  of  Men.  You  cannot 
bring  up  men  when  you  give  them  all  things  free — everybody  should 
kpow  that.  Now,  I  said  the  real  grafter  in  New  York  City  is  not  the 
big  grafter.  There  are  grafters  up  and  down  the  side  streets — littb 
grafters — many  grafters  who  are  shrieking  out  loud  eternally  for  you 
to  give — give — free  meals,  free  hospital  service,  free  charity  that 
amounts  to  full  support.  Ask  any  physician  what  he  thinks  of  the 
city's  free  hospital  service.  Ask  any  professional  man  in  the  City  of 
New  York,  in  any  line,  his  personal  opinion  about  the  free  gifts  of 
New  York  City.  To  you,  who  do  not  know,  will  come  a  great  enlighten- 
ment in  the  intrenched  position  of  the  multitudinous  little  grafters.  There 
are  twenty-two  hundred  organizations  in  the  City  of  New  York  giving 
charity.  That  is  what  all  this  half-tax  business  is  being  promoted  here 
for.  It  is  to  give  more  charity  to  the  tired  souls  that  either  do  not 
want  to  work  or  are  so  enfeebled  that  they  cannot  work.  Now,  if  we 
must  have  a  separate  Letchworth  Village  for  defectives  and  incapable? 
to  put  these  souls  in,  let  us  do  it  that  way  and  support  them  altogether 
under  proper  restraint  and  surveillance. 

PROFESSOR  SELIGMAN:  To  what  extent,  do  you,  as  a  prac- 
tical real  estate  man,  believe  that  people  who  have  invested  in  land 
values  in  New  York  City  have  made  much  more  money  relatively  to 
their  capital  than  in  other  walks  of  business? 

MR.  TREDWELL:  I  think  a  man  is  foolish  to-day  who  put^ 
his  money  into  land  values  watching  and  waiting  for  them  to  go  up. 
It  is  a  well-known  maxim  among  land  operators  and  speculators  that 
he  who  holds  land  over  five  years  has  a  loss  on  his  hands  after  that 
time  and  after  holding  it  for  five  years  if  they  are  wise  they  obey  the 
unwritten  law  and  sell  at  the  market. 

There  are  many  lots  always  to  be  sold  around  New  York  City.  I 
have  any  number  that  I  would  sell  now,  as  low  as  one  hundred  dollars 
per  lot.  If  any  gentleman  thinks  he  is  deprived  in  any  way  of  the  op- 
portunity to  purchase  land  and  make  a  barrel  of  money  thereby  it  is*  a 
wrong  proposition.  That  man  is  unaware  of  the  facts  because  when 
you  have  paid  taxes,  interest,  assessments  and  one  thing  and  another. 

309 


i 


f 


if  you  figure  it  all  up  then  at  the  end  of  five  years  you  cannot  beat 
compound  interest  working  against  you.  There  is  no  profit  in  holding 
land  against  an  accruing  interest-bearing  investment  of  dollars. 

PROFESSOR  SELIGMAN:  Do  you  think  from  practical  ex- 
perience that  money  earned  by  the  individual,  and  invested  in  real 
estate  in  Nev^  York  City,  brings  in  a  larger  return,  relatively,  than  in 
other  v^ralks  of  enterprise? 

MR.  TREDWELL:  It  does  not.  It  is  a  matter  of  common 
knowledge. 

PROFESSOR  SELIGMAN:  Do  I  understand  you  to  mean  that 
all  these  statements  that  have  been  made  to  us  about  the  appropriation  of 
large  community-made  values  by  individuals  are  unfounded?  Is  it 
your  theory  that  the  real  estate  men  in  New  York  City  are  not  an 
especially  favored   class? 

MR.  TREDWELL:  Exactly;  if  Mr.  A.stor  had  taken  his  money 
and  put  it  in  the  Emigrant  Savings  Bank  across  the  way  here  at  the 
beginning — he  had  a  large  fortune — as  a  compound  interest  proposi- 
tion it  would  have  beaten  out  his  land  investments  by  a  large  margin. 
It  must  be  remembered  when  Mr.  Astor  put  his  money  into  land  he 
was  one  of  the  largest  merchants  of  his  day  and  his  investing  capital 
was  made  in  merchandising.  It  was  not  that  rich  men  made  a  great 
deal  of  money  out  of  land  speculation.  It  was  rich  men  who  took  the 
profits  out  of  the  commercial  hazard  of  their  business.  It  is  not  the 
poor  men  who  can  individually  put  much  money  into  real  estate  to-day. 
In  bulk  or  collectively  the  total  is  very  large  but  the  speculator  or 
operator  or  investor  in  real  estate  is  usually  a  fairly  well-to-do  man 
who  out  of  trade  put  his  surplus  profit  into  real  estate.  The  reason 
why,  is:  They  do  not  want  to  put  all  their  eggs  in  one  basket.  Real 
estate  spells  safety  or  did  until  it  has  become  the  latter  day  target  for 
all  sorts  of  social  reforms. 

MR.  LEUBUSCHER:  Real  estate,  as  I  understand  you,  is  get- 
ting increasingly  harder  burdens  than  others  for  some  years? 

MR.  TREDWELL:     Declining  prices  indicate  that. 

MR.  LEUBUSCHER :  You  do  not  think  that  declining  immigra- 
tion has  anything  to  do  with  these  prices? 

MR.  TREDWELL:     Yes;  in  certain  spots. 

MR.  LEUBUSCHER:  Mr.  Purdy,  President  of  the  Tax  Board, 
has  given  figures  which  show  that  in  1880,  real  estate,  land  and  build- 
ings together,  paid  87  per  cent,  of  the  budget. 

MR.  TREDWELL:     Yes. 

MR.  LEUBUSCHER:  And  that  in  1914,  last  year — I  have  not 
got  the  figures  for  this  year — real  estate  paid  75  per  cent,  of  the  budget. 
Now,  you  say,  that  is  increasing  the  burdens  of  real  estate? 

MR.  TREDWELL:  Would  it  not  be  nearer  the  fact  if  yon 
made  the  statement  this  way:  97  per  cent,  of  the  tax  levy,  rather  than 
of  the  budget. 

MR.  LEUBUSCHER:    97  per  cent,  of  the  tax  levy? 
MR.  TREDWELL:     Yes.     Would  not  it  be  a  better  statement 
for  you  to  make  than  the  other? 

MR.  LEUBUSCHER:    97  per  cent,  of  the  taxes  received? 

MR.  TREDWELL:     97  per  cent,  of  the  tax  revenue  comes  out 

of  real  estate. 

310 


FOURTH    HEARING. 

November  17,  191 5,  8  P.  M.,  Room  16,  City  Hall,  Professor  Edwin  R.  A. 

Seligman,   Presiding. 


TESTIMONY  OF  MR.   DANIEL  CAVANAGH. 
Organizer,  Society  of  Native  Born  of  the  United  States  of  America. 

MR.  CAVANAGH :  It  is  certainly  advisable  to  take  off  the  tax 
on  improvements  and  buildings  and  put  it  on  land  values.  When  a 
citizen  undertakes  the  responsibility  and  invests  capital  to  beautify  the 
city  and  to  give  employment  to  idle  labor,  it  is  idiotic  to  penalize  him 
tor  doing  such  a  meritorious  thing.  Suppose  we  increased  the  license 
fee  on  saloons  in  this  town,  from  $1,500  a  year,  what  they  pay  to-day 
to  $10,000  a  year,  would  it  not  practically  obliterate  the  saloon  busi- 
ness?    Take  the  taxes  off  building  and  buildings  will  multiply. 

To-day  we  have  in  Greater  New  York  193,077  vacant  lots  and 
parcels  whose  assessed  valuation  is  618  millions  of  dollars.  The  work- 
ing people  are,  in  the  meantime,  looking  for  employment  and  capital  is 
looking  for  an  opportunity  to  invest  in  these  valuable  locations  Peo- 
ple cannot  buy  things  unless  they  get  employment.  There  are  only 
three  ways  I  know  of  to  make  a  living,  one  is  to  work  for  it,  the  second 
IS  to  beg  for  it,  and  the  third  is  to  steal  it.  The  people  are  not  allowed 
to  work  by  the  land  speculators  and  they  are  prohibited  from  begging 
or  stealing  by  the  police,  so  what  are  the  working  people  going  to  do 
under  such  conditions? 

We,  single  taxers,  want  to  encourage  capital  and  labor.  We  want 
to  stimulate  business.  We  want  the  people  to  have  money  in  the  only 
legitimate  way  they  can  get  it,  so  that  they  can  buy  things  Last 
winter  there  was,  according  to  the  records  of  the  labor  unions  500  000 
people  idle  in  Greater  New  York.  These  idle  people  had  no  money  to 
buy  the  products  of  labor.  The  City  of  New  York  must  raise  for  the 
year  1916  $212,000,000.  If  you  put  this  burden  on  the  land  specu- 
lators, we,  who  have  studied  this  question  for  a  generation,  claim  that 
involuntary  poverty  will  be  abolished;  that  capital  will  flow  to  New 
York;  that  business  will  boom  as  it  has  never  done  before;  that  the 
crimes  that  are  caused  by  undeserved  indigency  will  disappear-  that 
labor  will  be  prosperous,  happy  and  contented;  that  the  land  specu- 
lators, many  of  whom  are  aliens,  will  emigrate;  and  that  the  rei^n  of 
righteousness  will  obtain. 

The  very  same  conditions  are  rapidly  coming  to  pass  right  now  in 
the  United  States  that  existed  in  France  in  1789  previous  to  the  break- 
ing out  of  the  French  Revolution.  The  rich  are  getting  richer  and  the 
poor  are  getting  poorer.  When  labor  is  looking  for  employment,  capital 
should  keep  them  busy.  I  cannot  understand  why  the  rich  should  keen 
the  poor  idle  when  they  get  all  that  the  poor  produce  above  a  bare  liv- 
ing. You  would  not  keep  horses  in  a  stable  to  eat  their  heads  off^ 
Then,  why  allow  the  working  people  to  be  kept  idle?  The  bees  pro^ 
duce  the  honey  and  the  drones  consume  it.    It  would  be  foolish  for  the 

311 


!  1 


drones  to  stop  the  bees  from  gathering  honey.  They  have  the  flowers 
and  the  fields.  The  land  speculators  tell  the  bees  to  keep  oft  the  llowers. 
Now,  we  ask  this  Committee  to  get  the  drones  off  the  fields  and  flowers 
and  let  the  bees  get  busy.  The  workers  must  get  the  rent  to  pay  to 
the  landlord,  and  it  is,  therefore,  up  to  the  landlord  to  give  the  people 
a  chance  to  earn  the  money  to  pay  the  rent. 

PROFESSOR  SELIGMAN:     How  would  this  change  give  more 
employment? 

MR.  CAVANAGH:     If   you   put   the   taxes   on   land    values   you 

will  get  rid  of  the  speculators.  They  would  have  to  use  the  land.  They 
would  have  to  erect  buildings  on  it  and  in  that  way  give  employment 
to  labor. 

PROFESSOR  SELIGMAN:  After  enough  buildings  have  been 
erected  for  the  use  of  the  community,  what  then  would  these  men  do? 

MR.  CAVANAGH:     I  don't  believe  there  will  ever  be  enough. 

MR.  SIMON:  You  made  the  statement  that  New  York  City  could 
never  be  overbuilt. 

MR.  CAVANAGH :  I  mean  that.  I  mean  that  there  never  could 
be  enough  houses  built  in  the  city  to  satisfy  all  the  people. 

MR.  SIMON:  If  the  city  is  not  overbuilt,  do  you  still  think  that 
rents  would  come  down? 

MR.  CAVANAGH:  Every  new  house  built  has  a  tendency  to 
reduce  rents. 

MR.  SIMON:  If  you  have  got  just  enough  apartments,  not  too 
many,  how  would  the  rents  come  down? 

MR.  CAVANAGH:  I  do  not  think  the  people  can  ever  have 
enough. 

MR.  SIMON :    You  said  it  would  never  be  overbuilt 

MR.  CAVANAGH :    There  would  never  be  enough,  positively  not. 

MR.  LINDNER:  If  the  demand  is  going  to  keep  right  up,  Mr. 
Cavanagh  ? 

MR.  CAVANAGH :  I  believe  that  if  the  taxes  were  taken  off  im- 
provements and  placed  on  land  values,  we  would  get  rid  of  the  land 
speculator,  and  every  valuable  lot  would  be  used  to  its  fullest  capacity. 
Involuntary  poverty  would  be  abolished.  The  workingmen  would  have 
employment.  Our  young  men  would  get  married.  The  population 
would  increase  and  create  demand  for  more  houses. 

DR.  WILCOX:  Is  it  your  idea  when  you  say  that  there  nev<*r 
would  be  enough  houses  that  there  would  come  nearer  being  enough 
than  now? 

MR.  CAVANAGH:  Yes;  it  would  come  nearer  to  being  enough 
than  now. 

TESTIMONY  OF  MR.  PETER  AITKEN. 

MR.  AITKEN:  In  my  judgment  this  inquiry  gets  its  chief  sig- 
nificance, not  from  the  urgent  necessity  for  the  protection  of  certain 
speculative  real  estate  investments,  nor  from  the  need  of  this  great  city 

312 


ior  larger  revenues,  nor  even  from  the  effort  it  rt^presents  to  save  the 
uniortunate  victim  of  the  great  white  plague,  but  from  its  connection 
with  the  worldwide  movement  now  in  progress  to  substitute  Democracy 
for  Privilege.  By  Democracy  is  here  meant  control  by  the  masses  oi 
those  natural  resources  from  which  man  obtains  life,  liberty,  and  hap- 
piness. By  Privilege  is  meant  their  control  by  a  restricted  class.  Such 
substitution  naturally  produces  friction. 

We  are  \c\d  that  capital  will  withdraw  if  not  assured  its  customary 
reward  and  a  panic  will  ensue.  Privilege  knows  the  danger  involved 
in  thus  biting  off  its  nose  to  spite  its  face  and  only  employs  it  in 
extreme  cases,  but  the  masses  are  frequently  frightened  by  the  threat 
into  refusing  to  risk  their  half-loaf  for  the  chance  of  getting  a  whole 
one. 

Now,  we  are  all  Americans  and  the  American  idea  is  democracy. 
I  assume,  therefore  (certain  charges  to  the  contrary  noth  with  standing), 
that  this  Committee  is  in  sympathy  with  the  desire  of  the  masses  of 
wage  workers  to  get  the  full  product  of  their  labor  and  will  disregard 
the  threats  of  disaster  to  follow  the  enforcement  of  this  moderate  de- 
mand for  the  untaxing  of  buildings.  Of  course,  one  is  tempted  to  in- 
dulge in  counter  threats  of  what  will  happen  if  this  is  not  done,  but  we 
understand  that  is   bad  form — except  for  Privilege. 

An  effort  has  been  made  by  the  enemies  of  this  movement  to 
identify  it  with  what  is  known  as  the  single  tax,  because  single  tax 
is  said  to  aim  at  common  property  in  land.  This,  of  course,  is  deliber- 
ate misrepresentation.  Henry  George  did  not  advocate  common  prop- 
erty in  land  in  the  popular  sense  of  that  term,  which  is  that  a  man*3 
farm  or  garden  should  cease  to  be  under  his  control  or  that  what  he 
produces  from  it  should  cease  to  be  exclusively  his.  Such  a  proposal 
would,  of  course,  be  unpopular  with  the  American  people.  What  Henry 
George  in  fact  teaches  is  that  a  man  should  be  allowed  to  own  all 
the  land  he  will  pay  taxes  on. 

He  also  teaches  that  the  tax  on  land  should  be  high  enough  to 
insure  its  proper  and  profitable  use,  so  that  no  one  could  afford  to 
monopolize  and  hold  it  idle,  thereby  throwing  men  out  of  work 
and  keeping  down  wages.  This  would  be  popular  with  the  American 
people  for  they  know  that  when  wages  are  high  and  the  workers  are 
all  busy  everybody  prospers,  except  the  idler.  But  it  is  unpopular 
with  the  privileged  class  who  seek  to  monopolize  the  earth  and  the 
success  of  whose  schemes  requires  plenty  of  cheap  labor.  So  their 
champions  distort  Henry  George's  teachings  by  magnifying  the  letter 
which  killeth  and  suppressing  the  spirit  which  giveth  life. 

There  can  be  no  doubt  that  land  monopoly  is  un-democratic  and 
un-American.  It  is,  therefore,  safe  to  assume  that  no  member  of  this 
Committee  will  be  so  unpatriotic  as  to  thus  misrepresent  Henry  George. 
who,  whatever  his  mistakes,  was  the  greatest  champion  of  man's  rights 
to  the  use  of  the  earth  and,  therefore,  the  greatest  enemy  of  land 
monopoly  the  world  has  ever  Sj^en. 

Now,  while  the  single  tax  will  certainly  destroy  land  monopoly  in 
any  community  having  the  character,  intelligence  and  courage  to  apply 
it,  I  realize  that  there  are  few  communities  with  these  qualities  suffi- 
ciently developed  to  insure  its  proper  application  or  even  its  adoption. 
The  habit  of  land  speculation  is  a  stubborn  one.  I  am  not  prepared 
to  renounce  unreservedly  the  speculative  instinct  in  any  form.  All  busi- 
ness from  the  farmers  up — or  down,  is  more  or  less  speculative.  Perhaps 

313 


i 


: 


the  "lure"  of  the  unearned  increment  is  a  harmless  necessary  stimulant 
without  which  human  society  would  languish  and  die.  But,  I  think 
not.  I  think  a  normally  constituted  and  properly  regulated  society  can 
survive  and  progress  without  either  land  or  race  track  gambling.  I 
used  to  be  sure  but  recent  events  have  somewhat  shaken  my  confidence 
in  human  nature.  I  used  to  think  the  true  laws  of  social  progress  were 
clear,  unmistakable  and  beneficient.  But,  now,  1  am  wilhng  to  accede 
to  a  little  more  experimenting.  And  so  I  favor  this  experimenting  of 
10  per  cent,  a  year.  In  fact  I  would  be  willing  to  compromise  on  5 
per  cent.,  if  the  sincere  co-operation  of  privilege  could  be  secured  there- 
by. Even  that  I  should  wish  to  submit  to  a  referendum,  for  I  think 
that  unless  a  majority  of  the  community  wants  a  reform,  its  success 
is  doubtful. 

That  there  will  be  some  friction  encountered  in  making  the  change 
everyone  admits — that  there  will  be  some  householders,  as  well  as 
vacant  lot  holders,  who  will  have  to  pay  more  taxes  is  unquestionable 
and  that  some  mortgages  may  be  inconveniently  called — especially  if 
their  holders  are  interested  in  discrediting  the  plan — goes  without  say- 
ing, but  we  believe  these  evils  will  be  few  and  ephemeral,  while  the 
good  results  will  be  general  and  cumulative. 

These  exceptional  cases  will  be  unjustly  treated,  so  it  is  said. 
Changes  in  the  law — if  the  general  community  considers  that  they  will 
be  for  its  benefit — are  not  frequently  retarded  seriously  by  some  indi- 
vidual suffering  from  them.  The  protective  tariff,  let  us  take,  for  in- 
stance. Many  men  have  gone  into  the  protected  industries  with  the 
idea  that  their  profits  would  continue  to  be  large,  but  the  change  in 
public  sentiment  resulted  in  a  change  of  the  tariff  and  their  business 
was  practically  destroyed.  Now,  while  we  sympathize  with  them,  we 
do  not  consider  that  they  have  been  unjustly  treated.  The  same  may 
be  said  of  race  track  legislation,  where  great  properties  are  destroyed 
and  large  numbers  of  men  are  thrown  out  of  work.  We  have  had  a 
change  in  the  excise  laws  recently.  The  taxes  were  raised  from  $1,200 
to  $1,500  a  year,  and,  as  a  consequence,  many  saloons  were  thrown  out 
of  use  and  saloon  keepers  and  bartenders  are  idle.  That  did  not  pre- 
vent us  from  enforcing  the  law.  It  seems  to  me  that  the  question  of 
justice  or  injustice  is  somewhat  out  of  place  here,  in  fact,  we  never 
know  in  advance  what  social  justice  is.  I  understand  that  Herbert 
Spencer  has  defined  justice  as  being  based  on  expediency,  and  the 
expediency  of  this  measure  is  the  ground  on  which  I  ask  for  its  adop- 
tion. I  believe  that  the  good  results  of  this  legislation  will  be  so 
apparent  that  before  very  long  there  will  be  a  new  sense  of  justice 
created  in  the  people,  which  will  convince  the  public's  conscience  that 
monopoly  of  land  is  wrong,  unjust  and  immoral.  There  may  be  some- 
thing found  in  enforcing  this  law  that  would  have  an  injurious  effect. 
Then  we  must  decide  that  the  measure  is  unjust,  because  it  injures 
society. 

The  effect  of  a  tax  upon  land  is  just  the  reverse  of  a  tax  upon 
buildings,  so  far  as  rent  is  concerned.  If  it  were  only  applied  to  one 
building  or  to  certain  buildings  it  would  not  so  influence  rents,  for  land 
and  building,  where  property  is  improved,  are  inseparable,  and,  there- 
fore, both  taxes  will  act  the  same.  But,  a;n  increased  tax  on  all 
land  will  tend  to  bring  land  now  vacant  into  use  by  reducing  the  sell- 
ing price  of  land.  It  will  not  reduce  its  value  for  use  but  will  tend  to 
reduce  the  selling  price.     If  the  selling  price  of  the  land  is  reduced  and 

314 


the  taxes  on  buildings  are  reduced,  the  land  will  be  cheaper  and  will 

fork  Citt'L^'lT^V  r"  "^^'  r  ^"P^^^^  ''  -^  -"fi-d  it  tfNel 
York  City.    But  I  think  it  is  quite  clear  that  if  this  fundamental  reform 
showed  good  results  in  New  York  City  it  would  spread  t^  every  ^^^^^ 
country,  and  in  fact  would  spread  all  over  the  world.  ^ 

changed  ^''^^'' ''     """"   "^"   '^""'^'^   '^'^'^^  ^"^   ^^^^fit   from   the 

of  ca^ryinf  tl^Sldinr'^  '^"^^  ""^^  '"^""  ^^  ^'^  ''''^^^^'  ^^^ 
MR.  SIMON:     And  increase  the  cost  of  carrying  the  land? 
MR.  AITKEN:     Not  so  much.  The  cost  of  carrying  the  land  will 

^Lr'^'^r''^^^'^''  r^-     ^^  y^"  ''^'^'^'^  the  colt  oVcarryin.^ 
land  you  diminish  rents  because  you  bring  more  buildings  into  us!  ^ 

amou";? to'L'fs?.''-*     ^'''  "^"^'  '^  ^^"^  ''  ^^  '''  ^^  ^^^  ^  -tain 

H.nr^^;  ^l^^^^'  ,\^Z  """^  ^^"sider  that  the  land  would,  as  a  whole 
depreciate  for  use.     I  believe  that  should  be  considered.     That  Tone 
of  the  bases  of  this  argument. 

MR.  LINDNER:  You  do  not  think  that  the  use  value  would  be 
depreciated  but  the  selling  value  would? 

MR.  AITKEN :     That  is  what  I  tried  to  say 

Answering  Mr.  Simon's  question,  I  think  that  the  use  value  of 
the  land  is  a  better  basis  for  assessing  land  than  the  selling  value. 

MR.  LINDNER:  Then  you  would  retain  the  assessment  on  the 
basis  of  use  value. 

MR.  AITKEN:  I  should  be  disposed  to  do  that  decidedly  I 
have  often  thought  of  that. 

MR.  LINDNER:  Your  idea  of  this  is  that  this  is  an  interesting 
experiment  which  you  want  to  try  as  part  of  a  world  movement? 

MR.  AITKEN:    Yes. 

MR.  LINDNER:     Why  try  it  on  the  metrooolis  where  the  harm 
if  there  is  going  to  be  any  harm,  is  going  to  be  the  greatest  in  the 
United  States? 

MR.  AITKEN:  It  seems  to  me  that  serious  harm  is  so  unlikely 
as  to  be  negligible.  If  harm  became  apparent,  before  long  the  people 
would  repeal  the  law. 

MR.  LINDNER:  Why  not  start  the  experiment  on  a  smaller 
scale  ? 

MR.  AITKEN:     Because  it  would  not  do  so  much  good. 

315 


41 


TESTIMONY  OF  MR.  GEORGE  ALEXANDER  WHEELOCK. 

MR.  WHEELOCK:  The  gentlemen  who  are  for  the  exemption  of 
buildings  start  also  off  with  saying,  that  the  sea,  and  the  moon  and 
the  earth,  belong  to  the  people.  The  people  of  the  City  of  New  York 
have  borrowed  over  a  bilHon  of  dollars  on  the  land  and  building  values, 
and  these  undoubtedly  belong  to  the  people. 

The  owner  of  property,  if  he  has  a  mortgage,  only  has  second 
value.  He  has  an  equity.  The  first  mortgage  comes  first.  The  first 
mortgage  of  66  2/3  per  cent,  makes  the  mortgagee  the  more  than  half- 
owne^  of  every  piece  of  property.  The  experts  have  testified  before  the 
"Mills  Committee"  that  real  estate  in  the  City  of  New  York  is  over- 
assessed  to  the  amount  of  twenty  or  thirty-five  per  cent.  If  that  is 
true,  add  the  over-assessed  value  to  the  amount  of  the  mortgage,  and 
you  will  find  that  there  is  only  from  seven  to  ten  per  cent,  of  equity 
left  to  the  property  owner.  The  exemption  of  buildings  is  going  to  be 
a  very  dangerous  experiment.  If  there  is  depreciation  of  any  amount, 
the  entire  equity  of  the  property  owners  will  be  wiped  out.  As  ninety 
per  cent,  of  the  property  in  the  City  of  New  York  bears  a  mortgage, 
there  is  only  ten  per  cent,  left  which  can  survive  the  effect. 

The  object  of  this  step  towards  the  single  tax  is  to  reach  the  very 
rich  men,  and  they  are  the  very  men  that  are  going  to  escape  it.  When 
it  is  all  over  the  smaller  owners  will  be  wiped  out. 

They  also  think  that  the  unimproved  property  owners  are  almost 
all  dishonest.  The  people  who  own  unimproved  property  are  the  big- 
gest losers  in  the  city.  There  is  not  one  piece  of  vacant  property  in  the 
City  of  New  York  that  is  not  a  loser  on  the  first  investment.  It  will  be 
a  bigger  loser  should  this  come  in. 

The  investor  and  the  speculator — they  seem  to  draw  a  line  be- 
tween the  two.  The  man  who  invests  is  all  right,  but  the  man  who 
speculates  is  all  wrong.  That  is  a  distinction  without  a  difference. 
Every  investor  is  a  speculator.  Fifteen  years  ago,  I  was  an  investor. 
I  wanted  to  put  my  money  into  something  that  would  insure  me  a  nice 
income  in  my  old  days.  To-day  I  am  a  speculator.  Why?  Because 
my  property  does  not  bring  in  an  adequate  return.  It  does  not  bring 
in  one  per  cent. 

I  say  that  I  am  opposed  to  the  single  tax.  I  am  for  the  multiple 
tax.  I  believe  in  taxing  everybody  and  everything  that  is  taxable. 
Everybody  should  bear  a  just  burden. 

The  mortgagee  controls  the  situation  entirely.  The  final  word 
will  come  from  him.  They  have  testified  here  before  you  that  property 
would  shrink  in  value.  You  cannot  have  any  improvements  unless  they 
loan  you  money.  Ninety  per  cent,  of  the  mortgages  are  controlled  by 
the  mortgage  trust.  Where  are  you  going  to  get  the  money?  If  the 
lenders  will  not  loan  where  is  the  improvement  coming  in?  What  you 
have  got  to  do  is  to  please  your  lender.  They  do  not  like  this  change. 
They  do  not  want  it.  And  they  are  the  masters  of  the  situation.  They 
control  it  entirely. 

MR.  LEUBUSCHER:  You  stated  that  the  very  men  that  the 
propounder  of  this  proposition  wants  to  reach  will  escape? 

MR.  WHEELOCK:     I  did. 

MR.  LEUBUSCHER:    Did  you  refer  to  the  Aster  family,  whose 
holdings  consist  of  seventy-five  per  cent,  land  values  against  twenty 
five  building  values? 

316 


MR.  WHEELOCK:     They  would  escape  entirely. 

MR.  LEUBUSCHER:     Please  explain  how  they  will  escape. 

MR.  WHEELOCK:  Because  even  though  the  rest  of  the  prop- 
erty is  confiscated  on  account  of  the  mortgage  and  ninety  per  cent,  of 
it  is  mortgaged,  their  property,  not  being  mortgaged,  will  remain  in 
their  hands. 

MR.  LEUBUSCHER:  If  the  tax  is  entirely  on  land  values  and 
their  holdings  consist  of  75  per  cent,  of  land  value,  will  they  ndt  have 
a  larger  tax  to  pay? 

MR.  WHEELOCK:    They  have  the  wealth  to  sustain  it. 

MR.  LEUBUSCHER:     They  will  be   taxed   higher  than   to-day^ 

MR.  WHEELOCK:    I  presume  so. 

MR.  LEUBUSCHER:  You  also  stated  that  if  this  proposition 
were  adopted  that  the  lenders  of  money — the  mortgagees — would  draw 
in  their  loans  and  would  not  lend? 

MR.  WHEELOCK:    Indeed. 

MR.  LEUBUSCHER:  Do  you  consider  yourself  a  better  au- 
thority on  that  subject  than  Mr.  Hurd,  President  of  the  Lawyers' 
Trust  Company,  which  is  the  largest  lending  company  in  the  world? 

MR.  WHEELOCK:     No.      He  was  only  one  of  your  witne-- 
The  others  refuted  it.    The  others  were  against  it.    He  was  only  one 
of  a  number. 

MR.  LEUBUSCHER:  As  you  have  mentioned  your  property 
you  will  pardon  me  if  I  ask  you  a  few  questions  about  it.  Will  you 
kindly  state  what  kind  of  property  it  is? 

MR.  WHEELOCK:  It  is  residential  property  which  I  tried  to 
change  to  mercantile  property.  I  cannot  change  because  I  cannot  bor- 
row the  money  from  the  institutions.     I  want  a  half-million  dollars. 

MR.  WILCOX:  You  stated  that  about  ninety  per  cent,  of  the 
real  estate  in  this  city  was  mortgaged.  We  were  told  that  there  are 
about  two  hundred  thousand  real  estate  owners  in  this  city.  How 
many  of  those  two  hundred  thousand  do  you  think  would  be  wiped 
out  through  the  foreclosures  that  would  result  from  this  system? 

MR.  WHEELOCK:  I  think  about  one  hundred  and  eighty  thou- 
sand. 

MR.  WILCOX:  Do  you  think  the  ultimate  result  would  be  that 
all  real  estate  would  be  owned  by  one  person? 

MR.  WHEELOCK:  The  law  would  be  repealed  before  the  pa- 
tient dies.     They  would  use  the  restorative  of  change  of  law. 

MR.  LINDNER:  Would  it  not  be  true  that  the  mere  entering  on 
the  policy  would  scare  people  so  that  you  would  have  an  immediate 
reduction  because  the  people  would  have  to  unload? 

MR.  WHEELOCK:    Would  have  to  unload. 

MR.  LINDNER:     No  new  capital  would  be  available? 

MR.  WHEELOCK:  When  the  big  loaning  institutions  shut  down 
the    smaller   ones   shut   down    likewise.     They    are   afraid.     And    the 

317 


I' 


i 


estates  will  shut  down  and  they  will  take  their  money  out  of  improve- 
ments. ^ 

.u     ^^^   LEUBUSCHER:     You   say  that   out  of  the   two   hundred 
thousand  land  owners  m  New  York  City  only  one  hundred  and  eighty 
thousand  would  be  ruined— that  would  be  about  90  per  cent? 
MR.  WHEELOCK:     Yes. 

MR.  LEUBUSCHER:  What  percentage  of  the  land  values  would 
tnat  one  hundred  and  eighty  thousand  people  own,  would  you  say? 
What  per  cent,  of  the  land  values  of  New  York  at  the  end  of  five  years 
would  they  own?  "^ 

MR.  WHEELOCK:     That  is  a  matter  of  estimation. 

MR.  LEUBUSCHER:  Do  you  stick  to  your  figures,  in  view  of 
the  tact  that  the  investigations  of  the  Society  to  Lower  Rents  show 
tnat  99  families  own  one-ninth  of  the  land  value?  Do  you  still  stick 
to  your  figures? 

MR.  WHEELOCK:     Yes,  I  stick   to  the  figures. 


TESTIMONY  OF  MR.  CORNELIUS  N.  SHEEHAN, 

Secretary,   Twenty-eighth   Ward   Board   of  Trade,    Brooklyn. 

MR.  SHEEHAN:  In  the  City  of  New  York,  in  1910,  the  rent  was 
just  seven  hundred  and  fifty  million  dollars.  Of  that  seven  hundred 
and  fifty  million  dollars,  three  hundred  and  seventy-five  million  dol- 
lars was  house  hire  and  three  hundred  and  seventy-five  million  dollars 
was  land  rent.  That  house  hire  of  three  hundred  and  seventy-five  mil- 
lion dollars  was  just,  because  the  owners  of  the  houses,  as  owners  of 
houses,  rendered  service  to  the  tenant,  as  tenants,  equivalent  to  the 
three  hundred  and  seventy-five  million  dollars.  Of  that  three  hundred 
and  seventy-five  million  dollars  for  land  rent,  not  one  cent  of  it  was 
justified  in  being  taken  by  the  owners,  for  the  reason  that  the  owner 
as  owner,  did  nothing  in  return  for  it.  Of  that  three  hundred  and 
seventy-five  million  dollars,  one  hundred  and  twenty-five  million  dol- 
lars went  to  taxes  and  two  hundred  and  fifty  million  dollars  went  into 
private  pockets. 

Every  four  years  in  the  City  of  New  York  the  landlord  class  takes 
from  the  tenant  class  a  sum  equal  to  the  war  indemnity  that  Germany 
exacted  from  France,  and  the  sum  is  continuously  increasing,  so  that 
in  1914  instead  of  the  tenants  paying  seven  hundred  and  fifty  million 
dollars,  it  was  eight  hundred  milHon  dollars,  in  exactly  the  same  pro- 
portions. 

In  the  19th  and  28th  Wards,  where  land  values  are  approximately 
fifteen  hundred  dollars  per  lot  and  houses  worth  from  two  thousand 
to  four  thousand  dollars,  the  proportion  of  land  values  to  house 
values  being  small,  it  follows  that  there  is  a  low  rental  there.  On 
every  dollar  that  is  paid  in  the  Borough  of  Manhattan  for  rents,  using 
it  in  the  common  sense  of  the  term,  66  cents  goes  for  land  and  34 
cents  goes  for  improvements.  In  Brooklyn,  out  of  every  dollar  paid, 
51  cents  goes  for  land  and  49  cents  for  improvements,  with  the  result 
that  in   Brooklyn   rents  are  immeasurably   lower  than   in   Manhattan 

318 


and  as  a  consequence  of  that  we  have  got  a  very  much  better  com- 
munity there  in  Brooklyn  than  we  have  in  Manhattan. 

In  the  investigation  made  by  the  Sage  Foundation  Fund  it  was 
shown,  in  1907,  taking  the  average  family  to  be  one  earning  from  $500 
to  $1,800  a  year,  that  out  of  every  dollar  earned  on  the  average  25  cents 
went  for  rent  and  45  cents  for  food,  leaving  a  balance  of  30  cents  out 
of  every  dollar  to  go  for  everything  else.  It  has  since  risen,  so  that 
only  25  cents  is  left. 

You  will  notice  that  because  rent  and  food  have  absorbed  a  large 
proportion  of  the  average  income,  that  the  spending  power  of  the 
individual  is  reduced.  Now,  under  this  proposition,  what  we  propose 
to  do  is  this ;  as  62 >^  per  cent,  of  the  taxable  value  of  the  City  of  New 
York  consists  of  land,  taking  it  as  a  whole,  and  373^  per  cent,  consists 
of  improvements,  that  wherever  a  man's  property  is  divided  as  373^ 
is  to  62y2  the  taxes  will  remain  identical.  Wherever — I  am  now  taking 
it  upon  the  whole  50  per  cent,  reduction — at  the  end  of  five  years,  there 
would  be  this  change  of  twice  as  much  taxation  upon  land  as  upon 
improvements,  the  result  would  be  that  in  the  Borough  of  Brooklyn 
there  would  be  a  reduction  of  9  per  cent. ;  in  other  words,  that  wherever 
the  increase  in  land  value  was  beyond  62J4  per  cent.,  for  every  one  per 
cent,  increase  there  would  be  five-eighths  of  one  per  cent,  increase  in 
taxes,  and  the  contrary  would  be  true  if  they  are  decreased,  there  would 
be  a  decrease  in  taxation.  So  that  in  the  case  of  a  man  who  would  in- 
crease his  property  to  equal  the  value  of  the  land,  his  tax  would  be  re- 
duced nine  per  cent.  Now,  the  proposition  is  this :  Under  our  system 
of  franchise — and  land  value  is  a  franchise  value  and  nothing  else — if 
a  corporation  did  not  exercise  its  franchise,  we  immediately,  or  in 
theory,  do  confiscate  that.  We  have  now  got  a  Public  Service  Commis- 
sion which,  in  theory,  is  supposed  to  inflict  penalties  upon  such  a  cor- 
poration if  they  do  not  exercise  their  franchise  to  the  full  interest  of 
the  public.  Now,  we  hold  that  when  the  land  values  that  are  made  by 
the  community  and  made  by  no  one  else  rises  to  a  given  value  by 
productive  necessities,  that  property  should  be  used  to  the  full  value. 
We  say  it  is  bad  economics  when  a  law  is  not  so  framed  as  to  control 
the  use  of  community-made  value.  Our  proposition  is  by  increasing 
the  tax  on  land  we  reduce  the  taxes  on  houses.  In  that  way  we  make  it 
cheaper  to  build  houses.  We  make  it  more  profitable  to  build  houses 
But  more  true  than  anything  else,  by  taxing  land  and  permitting  a  man 
to  use  land,  which  is  the  essence  of  all,  we  make  man  a  free  being 
which  he  is  not  to-day  under  our  present  system  of  taxation. 


Ill 


TESTIMONY  OF  MR.  JAMES  P.  KOHLER. 

MR.  KOHLER:  I  agree  with  this  proposed  change  in  the  system 
of  taxation.  I  believe  that  the  land  should  bear  it  all.  I  believe 
that  land  can  bear  it  all,  and  there  is  no  question  about  it.  I  believe 
it  will  do  more  for  the  land  owner  than  anything  else.  If  you  look 
at  the  tax  lien  sales  in  Queens  you  will  see  how  they  are  suffering.  I 
think  a  change  in  the  system  of  taxation  would  obviate  most  of  this 
distress  on  the  part  of  the  land  owner  himself. 

There  is  such  concentration  of  wealth  in  the  hands  of  the  few  that 
the  multitude  of  consumers  are  deprived  of  purchasing  power.  That 
would  be  absolutely  destroyed  by  a  change  in  the  tax  system,  by  which 
the    "400" — these    land   owners — those    rich    individuals   that   came    in 

810 


I 


bi 


fl1 


1 1 


here  and  bought  farms  way  back— got  rich.  They  are  the  billionnaires 
of  the  present  day.  They  are  growing  rich  by  the  tremendous  increase 
in  business  here  in  New  York  City. 

Now,  every  ten  years  we  have  a  panic.  A  change  in  this  tax 
system  would  absolutely  stop  panics.  The  time  for  prosperity  to  come 
has  come.  After  it  has  come  the  real  estate  boomers  will  get  in  all 
over  the  United  States  from  the  Atlantic  to  the  Pacific.  They  will 
swallow  up  all  the  business  prosperity  and  the  country  will  be  thrown 
right  back  in  the  following  panic.  If  you  take  the  tax  off  buildings 
and  put  it  right  on  the  land,  you  are  going  to  stop  this  speculation  and 
panic. 

Buildings,  of  course,  include  factories.  Wherever  there  is  a  rule 
of  taxation  exempting  churches,  schools,  colleges,  you  multiply  that 
form  of  building.  If  you  exempt  houses,  therefore,  you  will  multiply 
that  form,  and  so  on,  factories  and  everything  else.  Now,  who  will  say 
that  factories  are  not  a  good  thing.  I  don't  know  of  anybody  that  says 
homes  are  not  a  good  thing.  I  cannot  imagine  how  a  tax  taken  off 
buildings  and  put  on  land  can  work  in  any  way  but  good  for  the  gen- 
eral community. 


TESTIMONY  OF  MR.  M.  W.  NORWALK. 

MR.  NORWALK:  I  present  myself  as  a  land  owner  and  as  a 
vacant  land  owner.  I  say  that  the  city  should  return  as  much  of  the 
money  as  possible  that  it  has  robbed  the  citizens  of.  There  is  no  rea- 
son why  the  city  should  come  and  tell  you,  Mr.  So  and  So,  you  have 
got  some  money,  give  me  some.  Would  you  allow  any  highwayman  to 
do  that?  Where  does  the  city  get  the  right  to  do  it?  She  is  assuming 
the  right. 

PROFESSOR  SELIGMAN:  Your  argument  is  then  that  we 
ought  to  have  no  tax? 

MR.  NORWALK:  We  ought  to  take  that  which  the  people,  as  a 
whole,  produce.  That  is  the  only  thing  we  ought  to  have — that  which 
belongs  to  us.  Every  penny  that  we  take  which  does  not  belong  to  us, 
whether  I  do  it,  or  you  do  it,  or  anybody  else  does  it,  or  it  is  done  by 
our  representatives  sitting  in  your  chairs  there,  I  say  that  is  robbery. 
That  is  what  I  hate. 

PROFESSOR  SELIGMAN :  Do  we  understand  that  you  are  in 
favor  of  taxing  land  or  the  improvements  on  land? 

MR.  NORWALK:  I  am  in  favor  of  the  tax  on  land  values  and 
nothing  on  buildings. 

Now,  as  I  am  a  land  owner  I  want  to  make  my  statement  to  you. 
I  bought  a  piece  of  land  on  which  I  concluded  to  put  a  residence  for 
myself  and  my  family.  I  went  to  the  builder  and  asked  him  about  it 
and  he  said :  "Well,  it  will  cost  you  from  three  thousand  to  six  thou- 
sand dollars  for  a  private  residence."  I  consulted  the  assessor  and  he 
said  they  would  tax  me  about  two  per  cent,  on  the  three  thousand  dol- 
lars and  that  two  per  cent,  would  cost  me  sixty  dollars.  That  means 
that  the  city  is  taking  that  much  away  from  me.  That  is  one  thousand 
for  every  three  thousand  that  I  put  in  because  two  per  cent,  of  three  is 
six  per  cent,  on  one  thousand;  in  ot^-'or  words  I  will  lose  a  thousand 
dollars.    That  is.  if  I  put  up  a  three  thousand  dollar  house  (never  mirsl 

320 


about  the  land  for  they  will  tax  me  on  that  too,  and  that  is  not  the 
question  here).  They  will  be  actually  robbing  me  of  one-third  of  the 
value  I  put  in. 

By  justice,  what  is  yours  is  yours.  What  I  earn,  what  I  produce, 
if  I  give  service  and  get  something  for  my  services,  that  is  mine.  If 
you  give  services,  it  is  yours.  Now,  what  service  does  the  owner  of 
land  as  such  give?  He  gives  me  a  permit  to  work.  That  is  what  he 
gives  me.  He  gives  me  a  permit  to  go  and  build.  He  did  not  produce 
that  land.  He  did  not  buy  it  from  a  man  who  produced  it.  I  might  say 
to  you,  that  coat  there,  I  made  it.  Or  I  might  say  I  made  the  value  of 
it.  That  would  not  make  any  difference.  In  so  far  as  land  is  concerned 
you  know  no  man  made  it.  This  coat  was  made  by  the  tailor.  The 
carpenter  made  this  desk.  The  builder  made  this  building.  You  have 
no  right  to  take  one  part  of  it  nor  have  I ;  but  land  value  has  been  made 
by  the  people  at  large.  The  land  has  been  made  by  nobody  and  nobody 
has  the  right  to  own  land.  Man  can  use  land  only  exclusively.  If  you 
want  to  exclude  everybody  else  from  using  that  land  you  must  pay  to 
the  excluded,  by  paying  the  full  annual  rent  of  it  to  the  people,  in  the 
shape  of  taxes. 


t'WWW  ' 


TESTIMONY  OF  MR.  BENJAMIN  DOBLIN, 
Representing  the  New  York  State  Single  Tax  League. 

MR.  DOBLIN :  Our  tax  difficulties  seem  to  require  the  attention 
of  an  investigating  committee  every  year,  and  some  years  the  attention 
of  more  than  one  committee. 

It  is  evident  that  our  tax  system  is  defective. 

Since  failure  has  been  the  outstanding  characteristic  of  our  pre- 
ceding attempts  to  rectify  tax  evils,  I  take  it  that  this  Committee  will 
consider  with  tolerance  principles  which  lie  at  the  foundation  of  a 
just  system  of  taxation,  even  though  they  run  counter  to  its  predilec- 
tions. Unless  you  do,  your  labors  will  be  as  barren  as  have  been  the 
labors  of  other  committees.  There  are  three  important  threads  in  the 
fabric  of  taxation :  The  first  thread  is  the  valuation  of  property  legally 
liable  to  taxation.  The  second  is  the  budget  which  determines  the  sum 
of  revenue  necessary  to  be  raised.  The  third  is  the  tax  rate,  which  is 
the  percentage,  or  tax  levied  upon  each  individual  item  of  assessed 
property,  calculated  to  provide  the  amount  of  money  required  by  the 
budget. 

I  take  it,  that  there  is  no  ground  for  dissatisfaction  with  the  tax 
rate.  If  property  has  been  equitably  valued  and  the  budget  is  ac- 
ceptable, then  the  tax  rate,  whatever  it  may  be,  which  is  obtained  by 
a  mathematical  process,  must  be  as  innocent  as  the  multiplication  table. 

This  narrows  our  study  to  the  two  remaining  threads.  Property 
legally  liable  to  taxation  and  its  valuation.  Valuations  or  appraisals 
are  made,  under  the  direction  of  the  Tax  Commissioners,  by  deputies. 
It  is  true  that  there  is  some  complaint  that  the  valuations  of  real  estate 
are  inequitable.  It  is  said  they  are  excessive.  In  support  of  this  allega- 
tion a  table  is  submitted,  consisting  of  properties  which  have  been  sold 
with  the  true  considerations  stated ;  we  are  properly  cautioned,  how- 
ever, not  to  place  too  much  reliance  upon  this  showing,  because  the 
exhibit  is  not  an  accurate  statement  of  fact. 


321 


h  I 


Ifl 


The  deputies  charged  with  the  duty  of  valuing  real  estate  for  the 
purpose  of  taxation  are  not  limited  in  their  findings  by  sales  at  fore- 
closure. We  know  that  many  influences  are  operative  in  such  sales 
which  may  produce  sub-normal  values.  The  substantial  accuracy  of 
the  valuations  is,  to  my  mind,  clearly  established  by  the  table  of  sales 
for  1914,  which  have  been  cited  by  the  Real  Estate  Board  in  support 
of  its  claim  that  property  is  over-assessed.  This  table  showed  that  the 
assessed  value  exceeded  stated  considerations  by  only  one  per  cent, 
for  the  whole  city;  that  for  the  Borough  of  Manhattan  the  excess  of 
taxed  values  over  sales  values  was  eight  per  cent,  in  191 3,  seven  per 
cent,  in  1914,  and  four  per  cent,  in  191 5,  up  to  June  24th.  As  a  matter 
of  fact,  these  objectors  to  the  accuracy  of  the  assessment  could  prove, 
most  conclusively,  before  any  commission  in  condemnation,  where  their 
individual  property  was  involved,  that  no  reasonable,  safe  conclusion 
could  be  reached  by  appraising  their  property  at  its  assessed  value,  less 
the  excess  over  average  sales  prices. 

Let  us  be  fair  to  the  assessing  officials.  I  am  not  asking  that  tax 
valuations  be  established  by  the  rules  employed  in  taking  individual 
holdings  for  public  uses,  for  that  method  might  lead  to  over-assess- 
ment. Ample  provision  is  made  for  the  protection  of  the  individual 
owner.  If  he  thinks  he  is  over-assessed,  he  has  the  right  to  prove 
that  fact  before  the  tax  officials.  If  they  refuse  him  relief,  then  he  can 
appeal  to  the  Courts.  We  know  the  Courts  are  quite  solicitous  in 
their  protection  of  property  rights. 

Assuming  that  the  charge  that  property  is  over-assessed  is  justi- 
fied, what  remedy  is  proposed?  Mere  growling  will  not  make  matters  any 
better.  The  Tax  Department  recently  submitted  to  the  legislature 
an  act  providing  that  in  all  future  sales  the  true  consideration  shall  be 
stated  in  the  deed,  and  that  the  facts  be  given  to  the  Tax  Department. 
This  was  designed  to  inform  the  assessing  officials  of  the  truth  regard- 
ing nearly  all  normal  transfers.  This  avenue  of  knowledge  was  de- 
nied them,  however,  and  the  bill  was  defeated  by  the  hostility  of  the 
real  estate  interests.  I  submit  that  it  is  hardly  fair  to  criticize  the 
work  of  the  assessors  when  we  deny  them  the  facilities  they  require 
to  make  accurate  appraisals,  based  upon  all  legitimate  transactions.  No 
other  change  is  needed  to  insure  more  accurate  appraisal  than  the 
obligatory  provision  that  the  true  consideration  should  be  stated  in  all 
deeds. 

A  year  ago  it  might  have  been  necessary  to  thresh  out  again  the 
futility,  injustice  and  insufficiency  of  a  tax  upon  personal  property. 
Our  present  experience  has,  I  am  sure,  satisfied  this  generation  that 
the  tax  on  personal  property  should  be  discarded.  The  weight  of  ex- 
perience and  authorities  enforces  this  disposition  of  that  fool  tax. 

It  is  clear  that  real  estate  has  been,  and  must  continue  to  be,  the 
chief  source  from  which  to  gather  our  revenue. 

Real  estate,  however,  is  a  composite,  composed  of  improvements 
and  land,  and  you  are  to  determine  whether  our  taxation  shall  distin- 
guish between  them.  I  believe  it  should.  That  they  are  dissimilar  is 
evident.  Improvements  are  produced  and  may  be  prevented  by  the 
same  incidence  of  taxation  which  seeks  to  prevent  the  prevalence  of 
dogs  by  a  dog  tax,  or  to  suppress  saloons  l>y  a  high  license.  Land  is  a 
natural  element,  and  has  no  cost  of  production.  The  value  of  im- 
provement is,  on  the  contrary,  determined  by  the  cost  of  production  or 
reproduction.     I  shall  not  stop  here  to  discuss  the  question  of  upkeep 

322 


and  replacement,  except  to  call  attention  to  another  fundamental  dif- 
ference between  improvements  and  land,  for  we  can  agree,  I  believe, 
that  land  is  not  burdened  with  any  overhead  charges. 

The  value  of  land  is  clearly  and  unmistakably  a  social  value.  Prof. 
Sehgman  contends  that  it  is  not  the  only  thing  to  which  a  social  value, 
or,  as  the  economists  term  it,  an  unearned  increment,  attaches.  Whether 
It  IS  true  of  other  things  or  not,  the  Professor  does  not  contend  that  im- 
provements on  land  are  equally  favored  by  economic  influences—that 
they  gain  an  unearned  increment. 

Land  is  the  only  taxable  property  that  is  now  tax  free.  A  tax 
on  a  produced  article  is  blended  into,  and  becomes  a  part  of  the  cost 
of  production,  and  is  passed  on  with  a  profit  to  the  consumer.  Taxes 
on  land,  on  the  contrary,  are  a  permanent  deduction  from  the  selling 
price,  so  that  the  purchaser  buys  the  property  tax  free.  The  purchase 
price  of  land  is  determined  by  deducting  taxes  from  the  estimated 
gross  income.  The  net  income  is  then  capitalized  at  the  current  rate 
of  interest.    This  value  is  its  taxable  value. 

Suppose  New  York  City  should  find  an  inexhaustible  deposit  of  gold 
at  the  end  of  one  of  its  new  piers  from  which  it  could,  at  practically  no 
cost,  dredge  each  year  enough  gold  to  pay  all  the  cost  of  running  the 
city;  in  this  event  it  could  abolish  all  the  present  taxes  on  real  estate. 
It  is  obvious  that  the  effect  would  be  to  enhance  land  values  by  the 
capitalization  of  the  annual  saving  in  taxes. 

Is  not  this  really  conceded  by  the  advocates  of  diffused  taxation, 
who  plead  that  the  present  taxes  on  real  estate  are  depressing  realty 
values.  The  clear  inference  of  their  position,  I  take  it,  is  that  if  real 
estate  is  relieved,  land  values  will  rise. 

Let  me  make  this  proposition  more  concrete:  Suppose  a  broker 
submits  a  parcel  of  land  to  one  of  the  gentlemen  on  this  Committee, 
seeking  an  investment.  The  broker  presents  the  data  showing  the  cost 
of  the  improvements  with  the  itemized  carrying  charges,  together  with 
the  gross  rental.  This  gross  rental  for  the  land  amounting  to  $700 
annually,  at  what  price  do  you  think  the  investor  would  consider  the 
land  for  purchase?  Let  us  assume  that  he  is  content  with  a  modest 
five  per  cent.,  would  he  pay  $14,000  for  the  plot  of  land?  Certainly 
not.  He  would  first  deduct  $200  or  thereabouts  for  taxes,  and  agree 
to  pay  no  greater  price  than  $10,000,  which  at  five  per  cent.,  must 
return  $500,  equal  to  the  balance  of  the  gross  income  remaining  after 
deducting  taxes.  I  take  it,  that  those  on  this  Committee  familiar  with 
real  estate  transactions  will  concede  the  substantial  accuracy  of  this 
illustration.  It  is  proper  to  ask  at  this  point  who,  in  this  instance, 
pays  the  taxes— -surely  not  the  buyer;  he  has  already  discounted  the 
tax  in  the  purchase  price.  Let  us  press  this  point  a  little  closer,  and 
ask,  who  will  gain  if  subsequent  taxes  are  less  than  the  $200  per  annum 
agreed  upon  as  a  fair  allowance?  The  owner,  of  course,  and,  in  any 
subsequent  sale,  he  will  capitalize  that  "velvet."  This  has  been  the 
procedure  and  the  cause  of  some  of  our  rich  landed  estates.  A  repre- 
sentative of  the  Astor  estate  testified  before  the  State  Legislative  Com- 
mission that  the  present  taxes  were  taking  a  larger  percentage  of  in- 
come than  formerly.  This  was  a  gratuitous  statement  on  their  part; 
the  elements  that  went  to  the  finding  of  that  conclusion  were  carefully^ 
and  I  suspect  consciously,  withheld.  It  might  help  our  understanding 
of  the  situation  if  they  would  give  us  the  total  amount  of  rent  col- 

323 


ii 


i 


Mi 


w- 


lected   at   present,   as   against  the  total   collected   ten,   twenty,   thirty- 
years  ago. 

Now,  suppose  your  great,  great  grandfather  had  purchased  this 
island  at  the  equivalent  of  twenty-four  dollars;  that  his  descendants 
had  busied  themselves  since  his  death  with  collecting  and  spending  an 
ever-increasing  unearned  income,  would  you  consider  it  unjust  to  tax 
this  unearned  income  at  its  source  rather  than  relieve  it  from  burdens 
clearly  and  legally  incident  to  it  by  taxing  onerously  investments  in 
bonds  held  since  1906,  which  have  declined  in  value  21  points?  Here,  I 
want  to  call  your  attention  that  while  all  other  securities  have  de- 
creased in  value  the  value  of  lots  in  New  York  City  has  increased. 

Can  a  merchant  and  his  descendants  live  on  the  income  of  in- 
active goods,  and  at  the  end  of  one  hundred  or  more  years  leave  his 
posterity  far  richer  than  he  was? 

Improvements,  like  other  merchandise,  deteriorate  in  value  and 
utility;  land,  on  the  contrary,  is  the  only  property  that,  here  or  there, 
but  most  certainly  somewhere,  and  all  the  time,  will  return  wealth 
to  the  fortunate  holder  without  effort,  and,  besides,  increase  in  value — 
a  splendid  instance  where  one  can  eat  his  cake  and  have  it.  too. 

Some  testimony  has  been  submitted  to  this  Committee  to  the 
effect  that  rents  would  not  be  reduced  if  all  taxation  was  concentrated 
upon  land  values.  We  may  be  innocent  of  economic  knowledge  with- 
out being  stupid.  If  it  were  true  that  rents  would  not  decline  then  the 
opposition  and  objections  to  the  proposed  shift  of  taxation  from  im- 
provements to  land  values  are  unreasonable  and  insincere. 

The  principle  that  should  guide  the  judgment  of  the  Committee 
in  the  expression  of  its  recommendations  is  found  and  successfully  ap- 
plied in  the  betterment  tax.  The  reasons  which  justify  apportioning 
the  cost  of  installation  of  streets  and  sewers  on  the  benefited  land 
should  be  as  controlling  in  the  levying  of  upkeep  charges  and  cost  of 
operation  of  public  utilities  and  services. 

We,  single  taxers,  are  not  primarily  concerned  about  improving 
the  mere  mechanics  of  taxation;  we  are  not  striving  for  a  means  but 
an  end.  It  is  not  the  unearned  increment  tax  or  even  the  taxation  of 
land  values.  What  we  want  is  that  the  land  of  America  shall  become 
the  heritage  of  the  whole  American  people.  The  single  tax  would 
transfer  all  taxes  from  private  wealth  to  common  wealth  and  by  im- 
posing a  tax  sufficiently  large  to  absorb  the  whole  of  the  socially 
created  values  for  the  public  good.  We  announce  without  equivocation 
that  we  mean  to  achieve  this  as  quickly  as  possible.  For  this,  we  are 
engaged  in  a  widespread  propaganda  and  when,  some  day,  an  informed 
public  decides  to  reassume  its  right  to  the  land,  the  landlord  cannot 
plead  surprise. 

I  take  it,  this  tax  reform  measure  you  are  considering  is  an  honest 
effort  to  make  an  easy  transition.  It  may  be  wise  to  introduce  the 
betterment  of  our  social  system  with  as  little  disturbance  as  possible. 
That  is  the  business  of  statesmen.  Single  taxers,  however,  are  not 
worrying  about  the  loss  the  beneficiaries  of  our  present  unfair  system 
shall  have  to  suffer  in  the  process  of  establishing  just  economic  condi- 
tions. 

We  single  taxers  have  no  patience  with  the  timid  high-brow  re- 
formers, who  would  avert  calamity  by  deodorizing  economic  cancers. 
Our  avowed  purpose  is  to  end  this  agony,  at  once,  if  possible,  without 

324 


regard  to  the  outcries  and  objections  of  the  pets  of  privilege.  If  you 
retard,  you  cannot  prevent  our  ultimate  success.  We  are  pacifists,  and 
desire  to  see  improved  social  conditions  established  by  the  reasoned, 
calm  action  of  citizens,  rather  than  the  frenzied  acts  of  a  mob. 

TESTIMONY  OF  MR.  ALEXANDER  LAW. 
Secretary  of  the  Tenants'  Union. 

AW  ^^'  ^^^'  ^"  ^^^  fi^'st  of  May,  1906,  a  meeting  was  called  in 
Abmgdon  Square,  which  well  filled  the  square;  at  this  meeting  the 
Tenants'  Union  was  launched  on  its  beneficent  course.  The  wide  pub- 
licity which  was  given  to  its  advent,  made  the  birth  of  the  Tenants* 
Union  an  economic  event  of  great  importance.  Similar  unions  were 
formed  in  many  places  throughout  the  civilized  world. 

The  Union  holds  that  through  exorbitant  rents,  the  tenants  are 
deprived  of  one-quarter  to  one-third  of  their  hard  earned  wages  foi 
the  right  to  work  and  be  of  benefit  to  the  community,  thereby  depriving 
their  families  of  much  needed  food  and  clothing  and  other  essentials, 
and  are  threatened  with  being  thrown  into  the  streets,  unless  they 
submit  to  any  exactions  the  landlords  choose  to  impose  upon  them. 
The  fact  that  their  health,  as  well  as  their  lives,  are  jeopardized  by 
being  compelled  to  live  in  congested  quarters,  deprived  of  sunlight  and 
fresh  air,  in  inflammable  disease-breeding  tenements,  many  of  them 
unfit  for  human  habitation,  is  a  disgrace  to  the  great  wealthy  Cirv  of 
New  York,  and  a  reflection  on  the  humanity  and  civilization  of '  the 
Twentieth  Century. 

The  Union  believes  the  great  need  of  this  city  is  sanitary,  fire- 
proof buildings,  equipped  with  modern  improvements,  for  our  tene- 
ment population  to  Hve  in,  and  lower  rents;  more  employment  for  its 
mechanics  and  laborers,  and  is  convinced  that  untaxing  buildings  and 
increasing  the  tax  on  land  will  materially  help  to  secure  both. 

The  recent  destruction  of  life  in  both  tenement  and  factory  fires 
shows  the  imperative  need  of  doing  everything  possible  to  encourage 
the  erection  of  fireproof  buildings  for  people  to  live  and  to  work  in. 

Untaxing  buildings  will  encourage  the  erection  of  such  structures 
and  have  a  tendency  to  eliminate  the  thousands  of  tenements  whose 
inmates  now  go  to  bed  every  night  in  danger  of  being  burnt  to  death 
before  morning  and  do  away  with  factories  whose  workers  every  day 
face  as  deadly  perils  in  trying  to  make  an  honest  living  as  do  the 
soldiers  engaged  in  the  great  war  now  devastating  Europe. 

In  the  Bronx,  and  other  parks  of  our  city,  all  sorts  of  wild  ani- 
mals, including  monkeys,  live  in  houses,  built  and  owned  by  the  city. 
They  have  all  the  advantages  of  Twentieth  Century  civilization,  for 
which  they  pay  no  rent  at  all.  If  we  can  house  animals  in  our  parks 
under  such  ideal  conditions,  what  can  we  not  do  for  our  citizens,  who 
pay  all  taxes,  including  the  salaries  of  our  public  officials,  who  make 
the  land  values  the  privileged  few  now  deprive  them  of,  and  keep  them 
in  hopeless  misery  and  poverty,  who  hold  land  out  of  use  while  hun- 
dreds of  the  children  of  the  city  are  sacrificed  every  year  for  want  of 
room  other  than  the  dangerous  and  over-crowded  streets  to  play  in  ? 

The  Union  recommends  the  election  of  an  administration,  which, 
in  co-operation  with  the  Board  of  Health,  will  condemn  unsanitary 
tenements  by  the  block,  and  on  the  block,  as  a  whole,  erect  sanitary. 

325 


V 


♦' 


til 


tfi| 


H 


I 


fireproof  dwellings  with  modern  improvements,  including  roof  gardens 
for  playgrounds,  the  entire  centre  to  be  an  open  court  to  be  also  utilized 
for  playgrounds,  to  be  rented  at  cost  of  acquiring  the  property  and 
keepmg  it  in  first  class  condition. 

The  Union  also  recommends  taking  all  Long  Island  in  the  city 
hmits,  as  we  are  convinced  the  great  City  of  the  Twentieth  Century 
will  be  built  there,  where  there  is  land  enough  swept  by  ocean  breezes, 
with  buildings  untaxed,  and  land  taxed  to  the  extent  of  making  it 
unprofitable  to  hold  it  out  of  use,  homes  can  be  furnished  for  the  mil- 
lions who  prefer  to  work  for  themselves  and  families,  instead  of  being 
deprived  of  their  God-given  rights  for  the  benefit  of  those  whose  only 
interest  in  them  is  to  rob  them. 


'.)■•!  I 


hl-f 


TESTIMONY   OF  MR.   LEO   KENNETH   MAYER, 
Chairman,  Brooklyn  Civic  Committee. 

MR.  MAYER:  If  the  Single  Tax  had  been  in  vogue  for  the  past 
decade  and  had  a  propagandist  appeared,  urging  the  transfer  of  taxes 
from  land  values  to  labor  values,  there  would  be  a  cry  beyond  the 
power  of  description  that  the  proposed  system  would  be  confiscatory, 
vile  and  deteriorating.  Now,  the  converse  is  true.  Labor  values  are 
taxed  and  certain  persons  are  advocating  relieving  labor  products  and 
improved  property  from  the  burden  of  taxation  and  the  imposition  of 
a  super-tax  on  land  values,  created  by  the  presence  of  society.  And 
now  there  is  a  cry  that  the  system  proposed  would  be  confiscatory. 
If  man  is  denied  the  opportunity  to  use  the  natural  resources  man's 
mission  on  earth  is  futile.  He  cannot  live.  The  moment  that  you  make 
it  unprofitable  to  hold  land— to  hold  land  for  speculation—just  that 
very  moment  do  you  force  land  into  use,  and  by  forcing  land  into  use, 
you  give  employment  to  every  man  in  the  country.  The  improvement 
of  land,  either  building  or  otherwise,  necessitates  the  employment  of 
diggers,  bricklayers,  plasterers,  carpenters,  electricians  and  a  hundred 
other  trades.  These  people  will  spend  the  product  of  their  labor,  or 
wages,  and  the  circulation  of  the  product  of  human  exertion  will  again 
be  spent  by  the  people  who  receive  it,  and  so  we  have  the  circulation  of 
money,  or  the  means  of  exchange,  which  would  still  cause  the  em- 
ployment of  men  in  other  walks  of  life. 

What  is  the  cause  of  crime  and  poverty?  Idleness.  What  is  the 
cause  of  most  murders?  Robbery.  And,  what  is  the  cause  of  most 
robberies?  Poverty  and  hunger.  Most  men  stay  on  the  straight  and 
narrow  path  until  the  pangs  of  poverty  take  the  opportunity  and  cross 
the  threshold  of  their  door.  That  man  is  cornered,  and  life  and  liberty 
for  him  become  a  question.  Then  he  kills  and  that  man  becomes  the 
scum  of  society.  Is  not  society,  and  society  alone,  responsible  for  this 
man's  downfall?  I  say,  place  a  tax  upon  idle  land  which  would  be 
confiscatory  to  that  land  if  it  remains  idle.  It  would  force  it  into  use. 
It  would  give  employment  to  men.  It  would  eliminate  idleness,  pov- 
erty and  hunger,  and  you  will  furthermore  get  your  sufficient  revenue 
to  run  the  city. 

326 


TESTIMONY  OF  MRS.  GEORGE  ALEXANDER  WHEELOCK. 

MRS.  WHEELOCK:  I  have  two  small  private  houses  which  some 
time  ago  were  without  tenants.  Last  winter,  during  the  period  of 
hard  times,  I  allowed  some  people  to  live  in  these  houses  without  pay- 
ing any  rent.  One  of  them  had  a  new  baby  and  he  felt  his  money  was 
insufficient  to  permit  him  to  live  where  he  had  been,  so  I  allowed  them 
to  live  in  my  house.  Towards  spring  I  had  to  move  them  out  because 
they  were  wrecking  my  house.  I  have  those  two  small  houses  rented 
now  at  $50  a  month.  Mr.  Purdy  knows  that  I  am  taxed  on  those  houses 
over  $1,100  a  year  each,  and  so  you  see  what  profits  I  get  out  of  those 
two  houses.  Then,  I  am  surrounded  by  loft  buildings  all  the  way 
around  me — the  twenty-five-story  Vanderbilt  Hotel  and,  in  the  back, 
big  loft  buildings.  I  consider  it  would  be  the  rankest  kind  of  injustice 
to  take  the  tax  from  the  Vanderbilt  Hotel  and  put  it  on  to  my  little 
place.  The  advocates  of  regulating  the  height  of  buildings  claim  that 
the  tall  buildings  have  stolen  the  light  and  air.  Now  they  want  to 
keep  it  without  paying  any  taxes.  They  stole  my  light  and  air  from 
me  and  now  the  game  is  to  keep  my  buildings  down  to  protect  the  theft. 
I  consider  it  an  outrage  to  have  me  share  their  taxes  and  put  it  on  my 
little  piece  of  ground. 

Then  about  putting  people  to  work:  I  have  been  very  anxious  to 
improve  that  property  and  help  out  this  army  of  unemployed.  I  have 
been  very  active  in  the  matter.  I  have  been  to  all  the  loaning  com- 
panies and  tried  to  get  a  loan.  I  have  offered  the  handsomest  kind  of 
bonus,  but  I  have  not  been  able  to  get  a  loan.  They  tell  you  that  the 
supply  is  greater  than  the  demand ;  that,  in  the  last  five  years.  Manhat- 
tan Island  has  been  depopulated  to  the  extent  of  180,000.  Because  you 
make  the  transit  facilities  so  splendid  for  the  people  in  the  outlying 
districts,  we  are  suffering  right  here  in  New  York  City  to-day.  As  for 
putting  people  to  work,  it  is  perfectly  absurd  because  the  lending  insti- 
tutions will  control  that  absolutely,  and  it  is  only  a  question  of  time 
when  the  property  owner  that  cannot  get  a  loan  is  going  to  be  wiped 
absolutely  off. 

As  to  the  putting  down  of  the  price  of  building  material  and  the 
price  of  building:  the  market  price  is  there,  and,  with  the  architect's 
fees  and  all  the  overhead  charges  that  go  with  it,  it  is  impossible  to 
make  that  operation  any  cheaper  than  a  certain  amount. 


r 

li 


li 


■4 


w 


H^7 


FIFTH  HEARING. 

November  22,  1915,  2.30  P.  M.,  Room  16,  City  Hall,  Professor  Edwin 

R.  A.  Seligman,  Presiding. 


TESTIMONY  OF  MR.  ROBERT  E.  DOWLING, 

Member,  Legislation  and  Taxation  Committee,  Real  Estate  Board  of 

New  York. 

PROFESSOR  SELIGMAN:  One  of  the  chief  points  that  has 
been  made  in  these  hearings  is  that  all  the  benefit  of  money  spent  as 
a  result  of  taxes  accrues  to  the  land  owner.  In  your  opinion  is  the 
land  owner  the  sole  beneficiary? 

MR.  DOWLING:     No,  not  in  my  opinion. 

PROFESSOR  SELIGMAN:     Will  you  tell  us  why  not? 

MR.  DOWLING:  In  the  first  place  he  does  not  get  any  immedi- 
ate increase  in  rent  from  improvements.  He  may  have  his  property 
leased  for  five  or  ten  years  ahead  and  by  the  time  the  lease  expires, 
there  is  no  benefit  and  no  increased  rent  owing  to  those  increased 
expenditures. 

We  know  that  in  the  past  five  years,  seven  years  or  eight  years 
even,  there  has  not  been  a  general  increase  in  rent,  but  there  have  been 
improvements  going  on  all  the  time.  That  demonstrates  at  once  that 
the  owner  of  the  land  does  not  get  the  increased  benefit  from  increased 
expenditures.  He  not  only  does  not  get  all  the  benefit  but,  in  most  in- 
stances, he  does  not  get  any,  that  we  can  find. 

PROFESSOR  SELIGMAN :  If  you  say  that  the  land  owner  does 
not  get  all  the  benefit,  in  what  way  do  other  classes  get  any  of  the 
benefit,  in  your  opinion? 

MR.  DOWLING:  The  tenants,  if  they  were  store  tenants,  mer- 
cantile tenants,  doing  business  in  retail  lines  or  in  wholesale  lines 
throughout  the  country,  have  made  very  large  profits  during  the  period 
when  land  values  decreased.  The  owners  of  land  were  being  subjected 
to  much  increased  taxation  because  of  improvements  that  benefited 
the  whole  population  of  the  city,  but  did  not  increase  land  values. 

PROFESSOR  SELIGMAN :  If  you  take  thirty  or  fifty  years,  of 
course,  land  values  have  increased? 

MR.  DOWLING:    Yes. 

PROFESSOR  SELIGMAN :  Do  you  think  that  the  same  cause 
which  has  in  general  led  to  an  increase  of  land  values,  namely,  increase 
of  general  prosperity,  has  also  contributed  to  an  increase  of  the  income 
of  the  community  at  large? 

MR.  DOWLING:  Yes,  I  think  the  income  of  the  community  at 
large  has  risen  in  a  greater  proportion  than  the  income  of  land  owners. 

328 


I 


PROFESSOR  SELIGMAN:  Assuming  that  other  classes,  as  well 
as  land  owners,  benefit  from  city  expenditures,  would  you  say  that 
the  net  result  is  to  have  only  the  land  owner  win  out?  If  this  other 
class  gets  a  larger  income,  have  they  got  to  pay  larger  rents  for  the 
houses  they  occupy?  Or,  would  you  say  that  the  wages,  salaries,  earn- 
ings in  general  in  New  York  City  are  so  much  higher  than  in  other 
places  in  the  State  that  even  allowing  for  the  increase  in  rent  there  is  a 
margin  over  for  the  community  at  large? 

MR.  DOWLING:  I  think  that  the  rents  have  not  increased  in 
proportion  to  the  earning  power  of  the  community  in  the  way  of  wages 
or  income  from  business.  I  think  that  is  plainly  shown  in  the  great 
business  district  south  of  23rd  Street.  I  think  that  you  can  say  safely 
that  rentals  in  general  are  not  as  high  as  they  were  in  1900.  We  know 
the  wages  and  salaries  of  all  commercial  people  in  large  business  houses 
are  higher  than  fifteen  years  ago.  Mechanics'  wages  are  higher ;  laborers* 
wages  are  higher,  but  rentals  are  not  higher. 

PROFESSOR  SELIGMAN:  Could  not,  however,  someone  say 
that  the  reason  why  mechanics'  wages  are  higher  is  because  the  cost 
of  living  has  gone  up? 

MR.  DOWLING:     Yes. 

PROFESSOR  SELIGMAN :  If  it  were  true  that  the  lawyer's  or 
doctor's  income  in  this  city  is  entirely  swallowed  up  by  the  increase  of 
rents  that  he  would  have  to  pay,  would  there  be  any  inducement  for 
those  people  to  come  to  New  York?  How  could  you  explain  the  immense 
increase  in  population  in  New  York  unless  there  was  a  margin  of  addi- 
tional income  which  is  to  be  found  here? 

MR.  DOWLING:  I  could  not  explain  that.  I  am  satisfied  that 
the  income  is  not  swallowed  up  by  the  increase  in  rents. 

PROFESSOR  SELIGMAN :  If  we  were  to  transfer  the  taxes  on 
buildings  to  land,  would  there  be  more  employment  for  the  laborers 
and  more  prosperity,  and  less  unemployment? 

MR.  DOWLING:    No. 

PROFESSOR  SELIGMAN  :  Do  you  believe  that  this  untaxing  of 
buildings  would  lead  to  a  permanent  and  continuous  increase  in  the  out- 
put of  buildings? 

MR.  DOWLING:     I  do  not. 

PROFESSOR  SELIGMAN:     Why  not? 

MR.  DOWLING:  Most  of  the  building  on  Manhattan  Island— 
and  I  presume  the  other  boroughs  are  the  same— is  conducted  by  pro- 
fessional operators  and  builders.  They  are  obliged  to  finance  their 
operations  by  mortgage  loans.  So  far  as  I  have  heard  from  the  lenders 
on  bonds  and  mortgages  and  what  I  know  myself,  the  transfer  of  the 
tax  from  the  buildings  to  the  land  would  discourage,  for  a  time,  at  any 
rate,  the  lending  of  money  on  bonds  and  mortgages — and  I  do  not 
believe  that  anybody  will  deny  that  for  a  period— a  time  that  I  cannot 
estimate— maybe  for  years— it  may  be  for  from  two  to  three  or  five 
years,  until  they  are  absolutely  satisfied  that  that  system  of  change 
of  taxation  will  not  hurt  them,  they  will  not  go  into  the  lending  of 
money  on  any  improvements,  consequently  there  will  be  less  employ- 
ment of  labor  in  New  York  in  building. 

329 


II*  < 


III 


PROFESSOR  SELIGMAN:  At  the  expiration  of  this  period, 
when  doubts  have  been  resolved — assuming  that  there  would  then  be 
an  increase  in  building  operations — would  this  increase  of  building  oper- 
ations be  a  continuous  one  after  the  new  equilibrium  has  been  attained? 

MR.  BOWLING:    Yes. 

PROFESSOR  SELIGMAN:  Would  the  change  in  taxation  make 
this  increased  demand  still  larger  than  before,  after  the  first  impulse 
had  spent  itself  and  the  population  had  been  housed  in  this  increase? 

MR.  BOWLING:  I  do  not  think  it  would.  I  think  it  would 
decrease  building  activity  for  some  time.  Then  if  rents  were  higher, 
if  there  was  a  great  shortage  of  space  and  rents  went  very  high,  why, 
if  people  would  be  able  to  pay  higher  rates  for  money  and  could  coax 
people  from  the  other  parts  of  the  country  to  lend  money.  You  under- 
stand money  will  come  if  you  pay  a  high  enough  price  for  it. 

PROFESSOR  SELIGMAN:  It  has  been  claimed  before  us  that 
because  the  ordinary  merchant  and  manufacturer  will  spend  less  for 
rent,  he  will  have  this  additional  money  to  have  for  other  productive 
employment.  What,  in  your  opinion,  becomes  of  the  money  which  is 
now  paid  in  the  way  of  higher  rent?  Boes  it  go  into  the  hands  of  the 
land  owner,  who  either  spends  it  in  riotous  living  or  puts  it  in  the  bank? 
If  he  puts  it  into  the  bank,  is  it  available  for  productive  employment? 

MR.  BOWLING:     Under  normal,  usual  conditions,  it  is.     Yes. 

PROFESSOR  SELIGMAN:  If  the  merchant  in  future  has  to 
pay  in  rent  only  eight  hundred  dollars  instead  of  one  thousand  dollars  he 
can  put  his  difference  into  more  luxuries,  or  with  two  hundred  dollars 
he  can  employ  more  workmen.  Would  that  mean  any  net  increase 
of  employment?  Boes  it  make  any  difference  to  the  community  whether 
the  two  hundred  dollars  is  employed  by  the  merchant  or  the  land  owner, 
as  an   economic  proposition? 

MR.  BOWLING:     I  cannot  see  that  it  does. 

PROFESSOR  SELIGMAN :     Is  it  your  opinion  that  this  change 

in  taxation  would  lead  to  great  social  and  economic  benefits  by  increas- 
ing wages  and  giving  more  employment? 

MR.  BOWLING:  I  think  the  reverse.  I  think  it  will  lead  to 
more  unemployment  in  this  city.  I  cannot  see  where  it  is  going  to 
reduce  rents.  I  cannot  see  any  possible  way  of  reducing  rent  by  a 
change  of  taxation,  that  is,  transferring  the  tax  from  the  building  to  the 
land.  We  have  to  raise  the  same  amount  from  real  estate.  It  will  not 
reduce  the  amount  to  be  collected. 

PROFESSOR  SELIGMAN:  If  you  take  it  off  buildings,  would 
there  be  a  tendency  not  to  shift  that  part  of  the  tax  to  the  tenant? 

MR.  BOWLING:  No.  I  do  not  see  how  taking  the  tax  off  the 
buildings  would  have  any  effect.  Take  a  high  building — there  are  so 
many — take  the  Woolworth  Building  if  you  like,  or  any  other  building 
you  are  interested  in.  There  is  a  great  deal  more  value  in  the  building 
than  there  is  in  the  land.  Which  is  the  argument  of  the  single  taxers 
that  would  untax  the  industry.  Take  an  instance  where  the  building  is 
assessed  at  little  more  than  the  land,  a  few  hundred  thousand  dollars 
more.    If  you  take  the  tax  off  that  building  and  put  it  on  to  the  land  we 

330 


might  save,  and  will  save  in  that  instance,  at  the  present  rate,  about 
ten  thousand  dollars  a  year. 

PROFESSOR  SELIGMAN :  Would  you  not  pass  that  on  to  the 
tenant? 

MR  BOWLING:  I  certainly  would  not.  The  tenants  pass  on 
to  us  additional  expenses  every  day  we  have  to  pay  for  coal.  We  had 
to  pay  more  for  coal  last  year  and  more  for  wages,  and  more  for  porters. 
We  never  pass  it  on  to  the  tenant.  We  get  the  same  rent  to-day  that 
we  did  in  1907.  We  would  simply  say  we  have  saved  ten  thousand  dol- 
lars in  taxes  for  the  time  being.  I  think  it  would  be  a  detriment  to 
other  properties  that  I  was  interested  in  in  other  parts  of  the  city 
where  unemployment  might  affect  tenants. 

PROFESSOR  SELIGMAN:  Would  the  competition  of  future 
new  buildings  not  compel  you  to  pass  that  on  to  the  tenant? 

MR.  BOWLING:  I  do  not  know.  We  have  not  been  able  to  pass 
the  increased  taxes  on  to  the  tenants.  There  is  really  an  over-supply 
in  business  space  right  now. 

MR    LEUBUSCHER:     As  I  understand,  you  told  the  Chairman 

that  if  this  system  of  taxation  is  adopted,  instead  of  the  tenant  benefit- 
ing by  a  lower  rent  he  would  have  to  pay  a  higher  rent? 

MR.  BOWLING:     I  think  he  would;  yes. 

MR.  LEUBUSCHER:  If  rent  is  decreased,  will  not  wages  be 
more  then  and  will  there  not  be  more  left  for  capital? 

MR.  BOWLING:  It  is  never  done  in  a  practical  sense.  Wages 
went  up  in  the  City  of  New  York  as  rents  went  up.  I  know 
know  that  from  actual  experience,  that  the  wages  of  all  building  labor 
increased  steadily  while  rents  were  increasing.  Then  rents  decreased 
while  labor  stood  at  the  same  price  because  of  conditions  of  control.  We 
have  not  a  free  market  in  labor.    We  have  a  controlled  labor  market. 

MR.  LEUBUSCHER:     Bo  you  mean  union  labor? 

MR.  BOWLING:  Union  labor  has  prevented  the  price  that  is 
paid  per  hour  going  down.  It  did  not  prevent  unemployment.  Where 
rent  has  decreased  we  must  pay  the  same  wages  whether  the  times  be 
bad  or  good. 

MR.  LEUBUSCHER:  Is  there  not  also  a  control  of  the  capital 
market  as  well  as  labor? 

MR.  BOWLING:     No. 

MR.  LEUBUSCHER:  It  has  been  alleged  that  there  was  a  com- 
bination of  the  large  money-lending  institutions  and  they  could  with- 
hold mortgage  loans  if  they  desired. 

MR.  BOWLING:  I  never  heard  of  it  in  all  my  time,  and  I  have 
been  thirty  years  in  this  business. 

MR.  LEUBUSCHER:     Some  of  the  witnesses  so  testified. 

MR.  BOWLING:  I  do  not  care  who  testified.  I  testify  that 
there  is  not.  There  has  never  been  any  control  between  them.  In 
fact,  they  compete  when  they  have  money,  as  I  do. 

MR.  LEUBUSCHER:  I  understand  you  to  say  that  the  adoption 
of  this  plan  would  discourage  the  lending  of  money  on  mortgage? 

331 


I 


.  I 


^ 


it 


MR.  BOWLING:     I  think  it  would. 

MR.  LEUBUSCHER:  Nobody,  practically,  would  lend  money? 
T  A  ^^-  I^OWLING:  I  stated  my  own  opinion.  I  would  not  lend. 
with  that         "^  anyone  else  that  would.     I  think  that  everybody  agrees 

r.,o^^?'.^^V?.^^^^^?'  ^"^  y^""  ^^^^^  ^^*h  Mr.  Kurd's  statement 
made  before  this  Committee  that  mortgage  lenders  have  nothing  to 
fear  by  the  adoption  of  this  plan? 

MR.  BOWLING:     I  do  not. 

MR.  LEUBUSCHER:  Mr.  Kurd,  you  will  concede,  is  an  expert 
on  that  question? 

MR.  BOWLING:  He  is  an  expert  in  the  mortgage  bond  business 
and  selhng  bonds  and  mortgages,  but  he  is  not  an  expert  in  the  real 
estate  business. 

MR.  LEUBUSCHER:  You  say  that  rents  have  not  increased 
as  much  as  wages  and  profits?  You  confined  that  statement  to  south 
of  Twenty-third  Street? 

MR.  BOWLING:     Yes. 

MR.  LEUBUSCHER:     Bo   you    mean    to   imply   that    eenerallv 

throughout  the  city?  ^ 

MR.  BOWLING:  I  think  that  there  are  some  sections  where 
rents  went  up,  owing  to  special  conditions.  In  the  city  as  a  whole 
rents  went  down. 

MR.  LEUBUSCHER:     You  do  not  ascribe  that  to  taxation? 

MR.  BOWLING:  No,  not  principally  to  that.  Of  course  in- 
creased taxation  lowers  values. 

MR.  LEUBUSCHER:     And  you  spoke  of  the  skyscrapers? 
MR.  BOWLING:     Yes,  I  did. 

MR.  LEUBUSCHER:  In  which  you  are  interested?  In  one 
instance  you  said  you  would  save  ten  thousand  dollars? 

MR.  BOWLING:  On  one  building  I  think  it  would  be  about 
that. 

MR.  LEUBUSCHER:  Bo  you  think  the  owners  of  skyscrapers 
who  are  interested  in  any  other  kind  of  real  estate  will  benefit  by  this 
plan? 

MR.  BOWLING:  I  expect  that  they  would  benefit.  I  think  I 
would  personally  benefit. 

MR.  LEUBUSCHER:  Bo  you  know  of  any  skyscraper  owner 
advocating  this  proposition  for  the  benefit  of  his  own  property? 

MR.  BOWLING:  Only  a  few  individual  owners.  I  do  not  think 
that  the  corporations  that  own  them,  the  bank,  the  trust  company  or  the 
insurance  companies  have  ever  thought  much  about  it.  I  heard  the  rep- 
resentative of  a  company  that  owns  a  large  building  say  that  he  thought 
it  would  be  a  very  good  thing  for  the  property.  But  he  did  not  think 
it  was  a  very  good  thing  for  the  city  at  large  or  for  us.  I  said  so  myself 
and  I  say  so  now  here. 

MR.  SIMON:  Mr.  Bowling,  it  has  been  stated  by  a  number  of 
witnesses  called  here  that  there  is  land  being  held  out  of  use  to-day 

332 


hJ^^cr^^  ""i  New  York.  Bo  you  know  of  any  cases  where  people 
have  got  land  that  is  ripe  for  improvement  and  can  get  the  finances 
are  arbitrarily  holding  it  out  of  use?  s  ^  txuduccb 

UnH^Th^^^^^?^^     '^^^^  ^''  ""''y  ^'^  P^^Pl^  that  have  carried 
and.    There  are  a  few  cases  like  Wendell  and  Eno.    They  do  not  th7nk 

hey  can  get  a  proper  mcome  out  of  the  property  and  do  not  want    he 
trouble  of  building.    It  is  not  business.     It  is  not  a  general  thi^  at  all 
It  would  not  pay  anybody  to  do  it.  ^ 

BR.  WILCOX :     It  was  testified  by  one  of  the  witnesses  that  in 
his  judgment  the  eflfect  of  this  change  would  be  to  wipe  out  the  ecu 'tie 
of  substantially  nmety  per  cent,  of  all  the  property  owners.     S>  you 
have  any  figures  on  that?  ^     r      j  o      x^u  you 

MR.  BOWLING:     I  do  not  think  you  can  wipe  out  ninety  per 
cent,  of  the  land  owners  in  this  city  by  any  change  of  taxation  except 
t  was  by  confiscating  their  land.     I  do  not  think  that  the  system  o'* 
taxation  would  confiscate  it  to  that  extent. 

BR.  WILCOX :  Would  the  owner  who  owns  his  home  in  the 
suburb,  where  the  improvement  is  of  more  value  than  the  land  be  in 
the  same  class  as  the  owner  of  the  skyscraper,  and  would  tend 'to  ^et 
a  benefit  rather  than  an  injury  directly  by  this  change? 

MR.  BOWLING:  Yes,  he  would  tend  to  get  a  benefit.  If  the 
tax  bill  were  less  on  the  land  he  would  save  that  much. 

BR.  WILCOX:  You  think,  as  far  as  the  owners  of  individual 
homes  are  concerned  in  New  York,  that  they  only  own  a  small  equity 
in  the  property,  and  that  the  eflfect  of  this  change  would  be  to  wine 
out  all  of  this  equity?  ^ 

'      MR.  BOWLING:     I  think  it  would. 

BR.  WILCOX:  You  think  the  tendency,  even  though  he  sav^- 
in  operating  expenses  in  carrying  his  house,  would  be  to  decrease  the 
value  of  the  house? 

MR.  BOWLING:  I  think  it  would  decrease  the  value  because 
the  saving  would  be  so  slight  in  those  expenses  that  it  would  mean 
nothing. 

BR.  WILCOX:  If  it  is  true  in  the  space  of  fifteen  years  that 
there  will  be  an  increase  from  four  tracks  to  thirty-eight  tracks  crossing 
the  East  River,  under  and  over,  is  it  not  to  be  expected  that  the  popu- 
lation of  Manhattan  will,  congested  as  it  has  been  for  a  great  many 
years,  tend  to  decrease,  and  that  consequently  rents  will  tend  to  fall?  " 

MR.  BOWLING:  I  think  that  the  population  will  probably  not 
increase  much  on  Manhattan  Island.  All  the  statisticians  have  esti- 
mated that  as  a  result  of  these  improvements  of  getting  out  to  other 
parts  of  the  city.  I  believe  that  is  true.  I  do  not  think  that  the  rent 
of  the  dwellings  that  will  be  left  on  Manhattan  Island  will  fall  because 
of  that.  The  cheapest  people  will  go  the  furthest  way  from  the  center 
— I  mean  the  people  who  can  pay  less  for  rent.  As  a  rule,  the  poorer 
dwellers  leave  the  city.  The  more  wealthy  go  out  sometimes  to  these 
places,  too,  to  get,  as  they  think,  cheaper  rent,  but  I  understand  that 
they  do  not  get  it.    They  start  for  it  merely. 

BR.  WILCOX:  That  is  a  very  interesting  statement;  I  had  sup- 
posed that  the  cheapest  and  more  hard-up  of  the  population  were  those 
that  stayed  in  the  cheaper  center  on  the  west  and  east  side  of  the  city. 

333 


1 


I 


it  I 

I    ; 


II 

^■; 

1 

: 

U^Hi 

'i 

^fl^^^B 

j, 

f':i 

I^^^^^H 

!(' 

I^^^^^^^^H 

•IL- 

j^^H 

jU^^ 

■ 

^^H 

\ 

MR.  BOWLING:     That  I  do  not  think  is  true  at  all.    I  think  that 
lirooklyn  has  a  cheaper  population  and  also  a  lower  income  per  capita 
than  New  York  City.    Of  course,  I  do  not  mean  all  classes.     I  mean 
among  the   labormg  classes  that  work   in   the  factories  of   Brooklyn 
They  get  less  wages  generally  at  the  same  employment. 

PROFESSOR  SELIGMAN:  If,  as  you  say,  rents  will  not  de- 
crease  but  rather  mcrease  and  knowing  that  in  advance,  how  can  you 
expect  that  your  land  value  will  be  seriously  or  deleteriously  affected? 

MR.  BOWLING:  Because  of  the  fact  that  values  are  not  based 
on  mere  incomes,  but  upon  the  confidence  in  the  security. 

PROFESSOR  SELIGMAN:  I  note  you  express  confidence  that 
the  results  which  other  gentlemen  have  testified  will  ensue  would  not 
happen ;  and  if  you  have  confidence  that  rents  would  not  come  down,  and 
that  competition  of  buildings  would  not  bring  them  down,  why,  then, 
should  there  be  any  difficulty  as  to  investments? 

MR.  BOWLING:  You  don't  see  it,  but  I  say  it  is  a  fact.  Now, 
that  IS  the  business  view  of  it.  I  am  not  speaking  as  an  economist.  I 
am  speaking  as  a  business  proposition.  It  is  just  the  same  as  different 
classes  of  property.  You  cannot  sell  me  property  in  Queens  no  matter 
if  it  pays  15%  profit.  The  capital  that  goes  into  real  estate  does  not 
believe  in  a  change  of  this  kind  and,  therefore,  you  will  have  to  change 
opinions  of  the  investors  on  it. 


TESTIMONY  OF  MR.  WALTER  STABLER, 
Comptroller,  Metropolitan  Life  Insurance  Company. 

MR.  STABLER:  I  want  it  to  be  distinctly  understood  that  I  am 
not  giving  any  views  of  the  Metropolitan  Life  Insurance  Company.  I 
am  giving  my  own  personal  views. 

The  company  invested  in  Manhattan  Island  in  mortgages  upwards  of 
$200,000,000  and  between  $14,000,000  and  $16,000,000  in  real  estate  besides. 
We  are  as  largely  interested  in  real  estate  in  the  city  as  any  other  corpora- 
tion and  more  than  any  individual. 

I  have  never  been  able  to  see  what  possible  advantage  could  be  derived 
by  the  city,  by  the  real  estate  owners,  or  by  the  people  of  the  city  from 
the  enactment  of  this  idea  into  law. 

In  the  first  place  I  do  not  see  how  we  can  maintain  the  city's  credit 
if  this  proposal  should  be  seriously  considered.  That  I  have  never  heard 
explained  or  even  any  attempt  made  to  explain  it.  That  is  the  most  serious 
consideration  of  the  whole  business. 

In  the  second  place,  does  it  not  threaten  very  seriously  the  largest 
vested  interest  in  this  city,  or  in  the  State— the  real  estate  of  the  city  ? 

If  we  were  a  new  community  the  situation  might  be  different;  but 
we  are  not;  we  are  an  old  community  going  on  with  this  present  method 
for  two  or  three  centuries.  I  cannot  see  how  it  would  be  possible  to 
bring  about  anything  of  this  kind  without  serious  disaster,  and  in  view 
of  the  present  condition  of  real  estate,  I  say,  that  it  should  not  have  any 
more  hurdles  to  cross.  I  say  that  this  thing  should  be  killed  for  all  time. 
That  is  my  feeling.  I  feel  very  strongly  upon  that.  I  do  not  own  a  dol- 
lar's worth  of  real  estate  myself.  I  do  not  expect  to.  I  think  it  would 
be  serious  business  if  anything  is  done  to  in  any  way  affect  the  value  of 
real  estate  or  the  readiness  with  which  it  may  be  exchanged  or  mortgaged. 

334 


If  this  idea  goes  mto  effect  it  is  certain  to  upset  values.  If  it  does  upset 
values  It  will  of  necessity  require  lenders  of  money  to  call  for  very  con- 
siderable payment  on  their  mortgages.  It  will,  in  my  opinion,  make  it  very 
ditticult  tor  real  estate  owners  to  borrow  money  on  mortgage  Now 
bring  those  two  things  together.  Bring  those  two  disasters  together  and 
you  make  a  very  serious  situation. 

While  I  am  here  I  want  to  answer  this  gentleman  here  who  asked 
a  question  whether  there  was  any  combination  among  money  lenders  I 
say  there  is  absolutely  nothing  of  the  kind  and  that  I  am  in  a  position'  to 
know,  because  there  can  be  no  combination  that  does  not  include  our  com- 
pany We  never  have  and  we  never  will  enter  into  any  combination  or 
anything  that  looks  like  a  combination.  I  do  not  think  any  such  thing 
exists  anywhere.  It  could  not.  Sometimes  there  is  very  little  money 
to  lend;  that  is  not  because  there  is  a  combination.  It  is  because  condi- 
tions are  such  that  people  have  not  got  the  money  to  loan. 

Now,  if  this  would  prevent  the  borrowing  of  money  on  real  estate 
It  would  prevent  the  production  of  buildings,  and  to  that  extent  the  people 
who  are  employed  in  the  production  of  buildings  would  suffer. 

MR.  LEUBUSCHER:  Mr.  Stabler,  the  fundamental  business  of 
your  company  is  that  of  life  insurance? 

MR.  STABLER:     Yes,  sir. 

MR.  LEUBUSCHER:     The  $200,000,000  that  you  have  invested  in 
mortgages  on  Manhattan  Island  are  for  the  investment  of  policies  holders  ? 
MR.  STABLER:    Yes. 

MR.  LEUBUSCHER:  Would  you  favor  a  plan  which  would  de- 
crease the  death  rate? 

.     MR.  STABLER :     Would  decrease  the  death  rate  ? 
MR.  LEUBUSCHER :     Yes. 

MR.  STABLER:  We  are  doing  all  we  can  to  decrease  the  death 
rate. 

MR  LEUBUSCHER :  Don't  you  think  that  is  the  principal  thins 
for  people  to  decrease? 

MR.  STABLER:  We  are  doing  all  we  can  to  decrease  the  death 
rate  by  various  plans. 

MR.  LEUBUSCHER:  Any  plan  which  would  automatically  cause 
the  substitution  of  new,  healthy,  modern  tenements,  for  the  old  rookeries 
would  tend  to  decrease  the  death  rate? 

MR.  STABLER:    Without  doubt,  it  would. 

MR.  LEUBUSCHER :  Without  doubt,  the  advocates  of  this  proposi- 
tion claim  that  would  be  the  result.  If  your  company  is  convinced  that 
would  be  the  result  of  this  plan,  would  you  adopt  it? 

MR.  STABLER:  It  would  not  be  possible  to  convince  us  of  any 
such  thing. 

MR.  LEUBUSCHER:  It  would  not  be  possible  to  convince  vou  of 
that  ?  ^ 

MR.  STABLER:  No.  My  mind  is  not  open  to  any  proposition 
which  states  that  this  plan  will  result  in  any  more  erection  of  buildings 
than  would  naturally  follow  a  demand  for  them. 

335 


r 


!■      ( 


TESTIMONY  OF  MR.  CHARLES   O'CONNOR  HENNESSY, 

President,  Franklin  Society  for  Home  Building  and  Savings;  Ex-Presi- 
dent, New  York  State  League  and  United  States  League  ol 

Savings  and  Loan  Associations. 

I  have  been  asked,  Mr.  Chairman,  to  deal  only  with  that  i)hase  of  the 
question  which  relates  to  the  effect  of  this  proposed  plan  upon  the  home 
seekers  and  to  deal  with  that  question  from  the  standpoint  of  the  Savings 
and  Loan  Associations  of  the  city.  I  should  disclaim  any  intentions  to 
represent  any  particular  loan  association  here  or  any  particular  body  of 
loan  associations,  but  from  my  experience,  I  might  say  that  the  sentiments 
which  I  express  here,  are  the  sentiments  which  are  held  by  building  and 
loan  association  people  generally. 

I  have  no  mental  reservations  whatever  in  stating  that  I  believe  that 
the  adoption  of  this  plan  would  greatly  promote  the  building  of  dwellings 
by  people  of  small  means.  In  this  connection  I  may  advert,  Mr.  Chair- 
man, to  the  statement  that  is  made  (and  which  I  believe),  that  in  the  City 
of  New  York  the  number  of  individual  dwellmgs — small  homes — is  less 
than  in  any  other  city  in  the  United  States.  I  believe  that  this  is  con- 
spicuously indicated  by  the  statistics  of  buildings  in  the  city,  I  assume 
it  is  not  necessary  to  argue  to  the  Committee  that  it  is  a  very  desirable 
thing,  by  any  measure  of  public  policy,  to  encourage  the  building  of  small 
dwelling  houses. 

I  have  always  thought  this  work  of  creating  small  homes  to  be  the 
most  important  work  of  the  savings  and  loan  associations  of  the  United 
States,  and  the  extent  of  their  work  in  this  direction  is,  I  venture  to  say, 
very  little  appreciated  by  the  people  generally  and  by  students  of  public 
questions.  It  is  not  known,  for  example,  that  in  those  two  States,  New 
Jersey  and  New  York,  there  is  something  like  $200,000,000  invested  by 
these  institutons  in  mortgages  upon  small  dwellings,  and  that  they  meet 
a  need  and  that  they  serve  a  purpose  that  no  other  class  of  financial  insti- 
tutions meet  or  serve.  The  large  insurance  companies  and  our  savings 
banks  invest  their  mortgage  money  in  apartment  houses,  in  tenements,  in 
office  buildings  and  in  the  larger  kind  of  real  estate  development,  and  it 
is  left  almost  exclusively  for  the  co-operative  savings  and  loan  associations 
to  deal  with  this  problem  of  finding  mortgage  money  for  the  small  home 
seeker.  In  the  United  States  when  we  find  that  there  are  over  five  thou- 
sand of  these  institutions,  with  resources  of  over  a  billion  dollars  invested 
in  small  homes  and  in  promoting  small  home  owning,  you  will  say  that 
I  am  justified  in  assuming  that  it  is  a  very  important  movement. 

Now  the  appraisement  of  savings  and  loan  associations  in  the  metro- 
politan district  indicates  that  the  average  building  of  the  small  home  own- 
er in  the  metropolitan  district  is  worth  two  and  one-half  times  to  three 
times  as  much  as  the  land  upon  which  the  building  is  erected.  Assuming 
the  tax  rate  to  be  two  per  cent.,  a  slight  calculation  will  show  that  each 
$1,000  of  building  value  which  is  remitted  in  the  tax  assessment  would 
be  an  equivalent  to  remitting  $400  of  a  permanent  mortgage  upon  the 
home  or  dwelling  house.  Now,  the  ambition  of  the  small  home  owner  is 
to  pay  off  his  mortgage.  It  ought  to  be  obvious  then,  Mr.  Chairman,  that 
the  present  small  home  owner  would  be  very  much  benefited  if  he  had  his 
taxes,  that  portion  of  his  tax  which  is  now  assessed  upon  the  building, 
transferred  to  the  value  of  the  land. 

I  am  quite  unable  to  see,  Mr.  Chairman,  how  the  untaxing  of  build- 
ings would  upset  values  or  discourage  the  lending  on  bond  and  mortgages. 
One  of  the  things  admitted  by  Mr.  Dowling  was,  I  believe,  to  the  effect 

386 


that  money  lenders  competed  for  loans  as  much  as  loan  seekers  competed 
for  money,  and  I  agree  with  him.  The  Metropolitan  Life  Insurance 
Company,  for  example,  is  interested  very  much  in  keeping  its  money  out 
m  safe  salable  bonds  and  mortgages.  Unless  it  may  be  shown— and  I 
am  quite  unable  to  apprehend  how  it  could  be  shown— that  a  slightly 
increased  taxation  on  land  value  is  going  to  destroy  or  seriously  damage 
either  land  or  building  values,  it  is  difficult  for  me  to  see  how  security 
that  is  substantial  in  itself  is  going  to  be  affected  by  this  proposed  change 
in  your  tax  system. 

In  my  capacity  as  a  member  of  the  New  Jersey  Legislature,  I  have 
had  the  honor  for  the  last  four  sessions  to  be  the  sponsor  for  a  bill  that 
proposes  to  do  for  the  State  of  New  Jersey  what  is  proposed  to  be  done 
by  this  change  in  the  tax  system  in  New  York.  The  bill,  which  is  known 
as  the  "Home  Rule  Tax  Bill,"  proposes  that,  after  approved  by  a  refer- 
endum vote,  each  municipality  may,  by  a  gradual  process  extending  over 
ten  years  gradually  transfer  the  basis  of  taxes  from  real  estate,  so  called, 
to  land  values.  That  bill  has  received  increasing  support  at  each  session 
of  the  legislature.  It  is  now  supported  by  many  substantial  organizations 
in  the  State.  It  received  at  the  last  session  of  the  legislature  the  support 
of  nearly  one-third  of  the  New  Jersey  Senate  and  some  sixteen  votes  in 
the  House  of  Assembly  out  of  sixty. 

PROFESSOR  SELIGMAN:  In  your  opinion,  would  the  con- 
templated plan  have  any  effect  at  all  upon  the  selling  value  of  land? 

MR.  HENNESSY :  It  is  my  opinion  that  the  application  of  this  plan 
in  the  form  proposed  would  not  substantially  affect  the  value  of  land  at 
all.  There  would  be,  in  my  opinion,  immediately  a  stimulation  in  building 
operations  of  all  kinds,  and  this  would  have  the  tendency  to  increase 
values  rather  than  to  decrease  them. 

PROFESSOR  SELIGMAN:  In  case  there  was  a  sudden  change, 
would  there  be  any  effect  upon  the  owner  of  the  land  and  upon  the  mort- 
gage-lending market? 

MR.  HENNESSY:  I  have  given  no  serious  thought  to  that  part 
of  the  question.  I  am  inclined  to  think  that  there  would  be  no  substantially 
different  immediate  effect  w^hatsoever. 

MR.  LINDNER :  You  say  that  the  change  that  is  contemplated  would 
stimulate  buildings.     In  what  way? 

MR.  HENNESSY:  The  fixed  charge  on  the  person  who  owns  the 
building  or  who  is  seeking  to  put  up  a  building  will  be  made  very  much 
lighter  by  this  system. 

MR.  LINDNER:  Would  it  have  any  effect  upon  the  speculation  of 
*^he  home  owner — his  hope  for  increased  land  value? 

MR.  HENNESSY:  While  I  believe  that  the  element  of  speculative 
increase  in  value  is  taken  into  consideration  to  some  extent,  I  want  to 
say  that  with  respect  to  building  and  loan  association  loans,  I  think  the 
extent  to  which  that  is  considered  is  negligible. 

MR.  LINDNER:  There  is  always  present,  is  there  not,  in  the  mind 
of  the  man  who  builds  a  small  home,  which  is  the  principal  business  of 
the  building  and  loan  associations,  the  expectation  of  an  increase  of  land 
value  ? 

337 


u 


.,]^^-  HENNESSY:  To  a  less  extent  is  that. true  than  in  any  other 
building  operation  imaginable.  The  man  when  he  buys  his  home,  buys  it 
for  a  home.  The  element  of  speculative  land  value  enters  into  it  very 
seldom.     He  thinks  of  it  as  a  home  site. 

Millions  of  dollars  are  being  loaned  in  the  nearby  New  Jersey  suburbs 
by  the  savings  and  loan  associations  of  this  city  to  small  people  who  labor 
in  New  York.  The  association  of  which  I  have  the  honor  to  be  manager, 
for  example,  has  some  million  and  a  half  dollars  loaned  in  Bergen  County,' 
which  is  just  across  the  river,  to  small  home  owners.  That  is  true  because 
the  type  of  home  that  the  man  of  small  means  is  seeking  today  is  not 
easily  found  in  the  City  of  New  York.  Conditions  may  change  when  your 
transportation  facilities,  going  across  the  East  River,  as  Mr.  Wilcox 
described  them,  bringing  within  easy  reach  of  the  business  centers  of  this 
city  the  outlying  territory,  have  been  accomplished.  Then  you  ought  to 
do  something  to  stimulate  the  speculative  builder,  if  you  please,  to  build 
homes.  The  proposition  that  is  before  you  will  do  more  than  anything 
that  I  can  think  of  to  bring  that  about. 

TESTIMONY  OF  MR.  CHARLES  H.  INGERSOLL. 

Vice-President,  Business  Men's  Association  to  Untax  Industry;  Chair- 
man,  Sub-Committee  on  Taxation,  Congestion  Committee; 
Member  of  Firm  of  Robert  H.  IngersoU  &  Co. 

MR.  INGERSOLL:  The  Business  Men's  Association  to  Untax 
Industry  views  the  problem  of  taxation  from  a  business,  and  not  from  an 
academic  nor  a  reform  point  of  view.  The  power  to  tax  is  the  power  to 
destroy  industry,  enterprise,  prosperity  and  employment.  We  believe  the 
canons  of  taxation  enunciated  by  Adam  Smith  are  sound  today.  The 
four  more  important  are:  The  patrimony  of  the  State  must  not  be  im- 
paired. Taxation  must  be  direct.  Taxation  must  be  equal.  Taxation 
must  not  interfere  with  business.  It  is  admitted  that  transferring  taxes 
levied  on  buildings  to  land  values  will  reduce  rent  and  taxes  on  small 
homes,  but  it  is  contended  that  it  will  not  improve  business  nor  help  the 
condition  of  the  workers  of  the  city. 

The  wildest  and  most  illogical  statement  of  those  who  oppose  the 
proposed  change  is  that  it  will  work  havoc  with  legitimate  business  inter- 
ests here  and  produce  a  panic,  and  that  then  the  people  of  the  city  will 
proceed  to  abolish  all  other  taxes  and  sources  of  revenue  for  local  purposes, 
and  secure  all  revenue  for  local  purposes  by  taking  more  of  the  ground 
rent.  The  admission  of  this  fear  by  land  speculators,  who  are  the  bene- 
ficiaries of  the  present  tax  system,  has  doubtless  convinced  this  committee, 
as  well  as  all  impartial  students  of  the  question,  of  the  soundness  of  our 
proposal  and  its  advantages  to  practically  all  the  people  of  the  city. 

Everyone  will  admit  that  prosperity  based  upon  a  flourishing  traffic 
in  munitions  of  war,  or  due  to  increased  export  to  meet  emergency  needs 
of  warring  nations,  financed  by  loans,  is  not  a  sound  nor  a  lasting  pros- 
perity. It  is  equally  clear  that  there  has  not  been  general  prosperity  in 
this  city  or  country.  The  taxation  of  industry,  including  buildings,  the 
personal  property  of  industry,  is  the  most  important  cause  of  the  continu- 
ous industrial  unrest  based  upon  low  wages  and  unemployment  for  the 
following  reasons: 

First,  industry  and  labor  pay  nearly  four-fifths  of  the  total  Govern- 
mental cost.  The  revenue  for  all  Governmental  purposes,  about  three 
billion  dollars  next  year,  must  be  derived  ultimately   from  one  or  two 

338 


i 


sources:  ground  rent  or  earnings  (current  or  saved).  Economists  agree  that 
all  taxes,  except  the  tax  on  land  values,  the  income  and  inheritance  taxes, 
can  be  shifted  to  the  user  of  the  commodity  or  service.  Approximately 
six  hundred  and  fifty  million  dollars  is  secured  for  the  maintenance  of 
State  and  local  government  by  taxing  ground  rents.  Taxes  on  industry, 
earnings  and  savings  amount  to  nearly  two  billion  four  hundred  million 
dollars.  Of  this  amount  approximately  forty-one  million  and  forty-six 
thousand  dollars  was  secured  last  year  from  the  individual  federal  income 
tax,  and  in  1913,  twenty-six  million  four  hundred  and  seventy  thousand 
nine  hundred  and  sixty- four  dollars  from  the  State  transfer — inheritance — 
taxes. 

The  equity  of  those  two  taxes  with  high  exemption,  low  rates  on 
small  incomes  and  bequests,  and  rapidly  progressive  rates  on  large  incomes 
and  bequests  may  be  admitted.  The  fact  remains  that  the  total  revenue 
from  both  income  and  inheritance  taxes,  at  present  about  one  hundred 
and  seven  million  dollars,  including  the  corporation  income  tax,  cannot,  I 
assume,  exceed  from  four  hundred  million  to  five  hundred  million  dollars; 
and  governmental  expenditures,  chiefly  due  to  preparedness,  will  probably 
increase  by  from  three  hundred  million  dollars  to  four  hundred  million 
dollars  within  the  next  three  to  five  years,  before  income  and  inheritance 
tax  rates  can  be  raised  to  derive  sufficient  revenue  to  meet  increased 
expenditures.  The  existing  unfair  and  injurious  burden  of  taxes  on  legiti- 
mate business  and  industry  will  continue,  unless  present  taxes  on  buildings, 
at  least,  are  removed  and  transferred  to  land  values. 

Industry  pays  fifty-five  per  cent,  of  cost  of  city,  and  sixty  per  cent, 
of  cost  of  State  government.  The  city  budget  of  New  York,  excluding 
the  city's  direct  tax  contribution  to  the  State  government  was,  in  1914, 
$188,129,261.  The  tax  on  land  values  was  only  $82,472,576.  Other  taxes, 
fees,  etc.,  amounted  to  $105,656,685.  $1,923,025  was  received  last  year 
by  New  York  City  from  the  State  school  board.  $103,733,660  of  the  cost 
of  local  government  last  year,  therefore,  was  paid  by  industry — that  is 
fifty-five  per  cent. — while  land  paid  only  forty-four  per  cent. 

The  State  Comptroller  gives  the  following  chief  sources  of  revenue 
for  the  general  fund  of  the  State,  amounting  during  the  year  ending 
September  30,  1914,  to  $30,269,689;  special  tax  for  court  expenses,  etc. 
(direct  State  tax),  $7,701,271;  indirect  taxes,  $38,305,980;  the  balance  is 
$4,282,427.  This  balance  is  from  fees,  fines,  duties,  receipts  from  State 
institutions,  the  insurance  and  banking  departments  and  interest  on  deposits. 

The  only  charge  on  land  is  its  proportionate  contribution,  under  the 
direct  State  tax.  As  the  value  of  land  and  buildings  is  not  assessed 
separately  in  most  of  the  cities  and  counties  of  the  State,  it  is  impossible 
to  state  exactly  what  this  tax  amounts  to.  A  very  close  estimate,  however, 
can  be  made.  The  equalized  assessed  value  of  real  estate  in  New  York 
City  was,  in  1914,  $7,561,076,209.  The  equalized  assessed  value  of  real 
estate  in  the  rest  of  the  State  was,  in  1914,  $3,399,184,683.  In  New  York 
City  the  value  of  the  land  was  61.7  per  cent,  of  the  total  value  of  real 
estate.  It  is  not  so  large  for  the  rest  of  the  State.  It  is,  therefore,  con- 
servative to  put  the  charge  on  land  for  the  cost  of  State  government  at 
sixty  per  cent,  of  the  direct  State  tax,  i.  e.,  $4,620,762.  That  is,  only  nine 
per  cent,  (aproximately)  of  the  current  expenditures  of  the  State  govern- 
ment was  paid  by  taxes  upon  land.  In  addition  to  the  tax  levy  of  $4,620,- 
762  on  land  values,  $1,979,970  was  secured  from  sources  other  than 
taxation,  such  as  interest  ($663,369),  institutions  for  the  care  of  inmates 
($867,851).    The  inheritance  tax  yielded  $11,162,478.    The  total  tax  levied 

339 


m 


h 

If 


upon  industry  for  the  current  cost  of  State  government  was,  in  1914,  $31,- 
426,574.  This  is  sixty  per  cent.— three-fifths — of  the  cost  of  State  govern- 
ment. 

The  proportion  of  the  cost  of  city  government  paid  by  industry  is 
steadily  increasing.  In  the  report  of  the  Department  of  Taxes  and  Assess- 
ments of  New  York  City  for  1913,  the  statement  is  made:  "In  so  far  as 
city  taxes  alone  are  considered,  the  tax  burden  on  real  estate  had  fallen 
from  87  per  cent,  to  75  per  cent,  in  the  period  from  1880  to  1913." 

The  high  selling  price  of  land  injures  legitimate  business  industry. 
New  York  City  has  incurred  an  enormous  debt  for  public  improvements, 
water  supply,  transit,  parks,  playgrounds,  schools,  etc.,  which  have  bene- 
fited financially  only  one  class  of  property — land — and  less  than  two  per 
cent,  of  the  population,  the  land  owners.  Hardly  a  dollar  of  the  debt 
incurred  by  the  city,  nor  a  dollar  currently  expended,  has  increased  either 
the  profit  of  business  or  the  opportunity  to  do  business  in  New  York  City. 
On  the  contrary,  by  increasing  the  selling  price  of  land  in  the  city,  through 
the  heavy  taxes  on  industry  and  light  taxation  on  land  values,  an  enormous 
burden  has  been  placed  on  legitimate  industry  and  all  workers  in  the  city. 

The  gross  funded  debt  of  New  York  City  on  June  30,  1915,  v/as 
$1,304,000,000.  The  interest  on  this  debt  next  year  will  be  almost  $55,- 
000,000.  The  assessed  value  of  land  here  is  approximately  $4,650,000,000. 
This  assessed  value,  or  selling  price,  of  land  constitutes  the  first  fixed 
charge  upon  the  industry  of  the  community,  under  our  present  tax  system, 
of  nearly  $300,000,000  annually.  This  must  be  paid  to  land  speculators 
before  industry  and  labor  get  any  return  for  work. 

On  the  average,  the  selling  price  of  land  in  New  York  City  increases 
$100,000,000  to  $125,000,000  a  year.  With  the  present  tax  rate,  the  increase 
in  the  selling  price  of  land  here,  within  the  next  decade,  will  be  at  least 
$1,000,000,000,  on  which  the  net  ground  rent,  at  five  per  cent.,  would  be 
$50,000,000;  that  is,  there  would  be  $50,000,000  additional  fixed  charges 
upon  workers  of  the  city  for  the  benefit  of  local  speculators. 

Transferring  taxes  from  buildings  to  land  values  in  the  city,  during 
the  decade,  would  mean  not  only  reducing  the  taxes  on  the  workers  of  the 
city  by  $60,000,000  to  $70,000,000  in  the  tenth  year,  but  reducing  in  addi- 
tion the  fixed  charges  levied  by  land  speculators  upon  legitimate  business 
interests  by  at  least  $50,000,000,  a  total  saving  to  workers  of  $110,000,000 
to  $120,000,000  a  year. 

New  York  industries  are  not  increasing  as  rapidly  as  in  competing 
cities.  The  census  of  1910  gives  the  following  figures  for  the  percentage  of 
increase  in  the  average  number  of  workers  in  factories,  and  the  value 
of  products  from  1899  to  1904,  and  from  1904  to  1909 : 


City. 


Average  Number  of 

f ^Wage  Earnings, ' 

1904  to  1909.     1899  to  1904. 


f Value  of  Products. * 

1904  to  1909.     1899  to  1904. 


New  York  . 
Chicago  . . . 
Philadelphia 
Cleveland    . . 

Boston  

Buffalo 

Newark    . . . . 
Baltimore   . . 
Rochester   . . 
Providence 
Jersey  City 


19.2 
21.5 
10.0 
32.3 
17.7 
18.0 
18.3 
9.8 
23.1 
16.5 
25.1 


19.6 

9.4 

6.6 

15.7 

11.9 

27.1 

18.2 

2.3 

15.3 

3.7 

17.0 


33.0 
34.1 
26.2 
58.3 
28.8 
48.5 
35.0 
24.5 
38.9 
30.7 
70.0 


30.2 
19.7 
13.7 
2.1.4 
13.3 
39.5 
33.1 
11.1 
35.9 
16.9 
20.6 


340 


m 


r 


It  will  be  noted  that  the  increase  in  the  average  number  of  workers 
in  factories  in  New  York  City  actually  fell  in  the  second  five  years— 1904 
to  1909 — while  the  increase  in  the  value  of  manufactured  products  was 
only  about  one-tenth  more  than  for  1899  to  1904,  although  the  increase  was 
several  times  as  large  in  a  number  of  cities.  The  census  figures  for  the 
increase  in  the  value  added  by  manufacture  also  show  New  York  City 
to  be  lagging  far  behind  its  competitors. 

There  are  several  reasons  which  will  operate  increasingly  in  the  future 
to  handicap  New  York  City  in  its  effort  to  maintain  manufacturing  suprem- 
acy. 

(a).  The  city  has  borrowed  heavily  instead  of  paying  currently,  and 
the  interest  charge  on  the  city  debt  is  almost  exactly  equal  to  the  total 
taxes  levied  this  year  on  buildings. 

(b).  The  "pay-as-you-go"  policy  forced  upon  the  city  because  it  has 
practically  reached  the  debt  limit,  will  increase  city  expenditures  unpre- 
cedentedly. 

(c).  The  shift  of  population  from  Manhattan  to  the  outlying  bor- 
oughs, through  the  construction  of  transit  lines,  and  distribution  of 
factories,  will  necessitate  large  expenditures  for  schools,  fire  and  police 
stations,  and  other  public  buildings  in  those  districts,  and  tend  to  render 
useless  many  public  buildings  in  Manhattan. 

(d).  Beginning  in  1918,  there  will  be  interest  to  pay  on  subway 
bonds. 

Mayor  Mitchel  testified  before  the  Joint  Legislative  Committee  on 
Taxation  that,  exclusive  of  any  direct  tax,  the  city  will  have  to  raise  in 
1920  $34,554,000,  in  addition  to  the  present  budget.  The  city  budget  and 
our  share  of  the  direct  State  tax  is  this  year  almost  $200,000,000,  so  that 
by  1920  the  budget  will  be  $250,000,000  to  $260,000,000.  It  will  probably 
be  $235,000,000  within  three  years,  and  the  major  part  of  the  increase, 
under  the  present  uniform  tax  rate  on  land  and  buildings,  will  fall  upon 
industry  and  the  workers  of  the  city.  No  change  in  the  nomenclature  of 
taxes  changes  this  fundamental  fact. 

It  is,  therefore,  imperative  that  deserved  relief  from  undeserved  bur- 
den of  taxes  should  be  accorded  the  legitimate  business  interests  and 
workers  of  the  city,  by  transferring  taxes  from  buildings  to  land  values, 
and  so  merely  requiring  the  financial  beneficiaries  of  governmental 
expenditures  to  pay  for  what  they  get,  instead  of  requiring  all  producers 
to  pay  for  these  expenditures  a  second  time  in  taxes,  after  having  paid 
for  them  once  in  paying  ground  rent. 

The  present  system  limits  employment.  High  selling  prices  of  land, 
and  heavy  taxes  on  industry  and  workers  and  high  rents  and  taxes  on 
homes  reduce  the  amount  that  workers  can  spend  for  manufactured  goods, 
and  other  commodities.  This  reduces  the  demand  for  commodities  and 
hence  reduces  employment. 

PROFESSOR  SELIGMAN:  In  the  comparative  statistics  that  you 
gave  on  the  relative  proportions  of  taxes  on  land  and  industry,  do  you 
consider  that  in  the  so-called  income  tax,  which  you  put  in  the  latter 
category,  a  large  part  of  that  tax  is  derived  from  income  from  lands? 

MR.  INGERSOLL:  Well,  I  do  not  remember  whether  I  did 
specifically. 

PROFESSOR  SELIGMAN :  In  view  of  the  fact  that  a  very  large 
part  of  the  inheritance  tax  is  paid  from  the  inheritances  that  consist  of 
land,  did  you  put  that  whole  amount  on  the  side  of  labor  rather  than  on 
the  side  of  land? 

341 


II 


y 


r 


:|f 


;ii|: 


lii 


MR.  INGERSOLL:     I  was  inclined  to  put  that  on  the  side  of  land. 

PROFESSOR  SELIGMAN :  In  view  of  the  fact  that  a  large  pan 
of  our  taxes  on  corporations  comes  from  the  real  estate  that  the  corpo- 
rations own,  would  you  consider  it  proper  to  put  all  the  corporation  taxes 
on  the  side  of  labor  or  on  the  side  of  land? 

MR.  INGERSOLL:     On  the  side  of  labor. 

PROFESSOR  SELIGMAN:  Notwithstanding  the  fact  that  this 
might  be  a  corporation  whose  entire  capital  consists  of  land? 

MR.  INGERSOLL:  If  that  is  a  premise  it  must  alter  the  fact.  It 
is  a  question  whether  it  comes  from  land,  and  in  such  a  way  as  to  be 
included. 

PROFESSOR  SELIGMAN :    To  the  extent  that  it  comes  from  land  ? 

MR.  INGERSOLL:     I  would  put  it  on  land,  of  course. 

PROFESSOR  SELIGMAN:  In  the  figures  that  you  gave  us,  you 
put  land  taxation  on  one  side  and  labor  and  industry  on  the  other  side. 
Now,  you  say,  that  in  the  case  of  income  derived  from  land,  and  in  the 
case  of  inheritances  derived  from  land,  the  increased  taxes  therefore  ought 
to  go  on  the  side  of  land. 

MR.  INGERSOLL:     Only  such  portion  as  actually  came  from  land. 

PROFESSOR  SELIGMAN:  Then  your  figures  would  have  to  be 
corrected  ? 

MR.  INGERSOLL:  If  you  want  to  put  it  on  that  basis  there  are 
possibly  some  items  that  do  not  belong  there.  That  was  the  fault  of  the 
statistician.    The  figures  I  have  given  are  so  far  the  best  obtainable. 


STATEMENT  OF  MR.  WILLIAM  H.  CHESEBROUGH. 

MR.  CHESEBROUGH:  I  have  no  doubt  that  the  passage 
of  the  proposed  legislation  would  greatly  unsettle  and  further  im- 
pair confidence  in  the  future  values  of  real  estate,  at  a  time 
when  the  welfare  of  the  community  imperatively  demands  that  con- 
fidence in  them  should  be  strengthened.  The  tremendous  burdens 
being  borne  by  real  estate  owners  should  be  lessened  by  obtaining  new 
sources  of  revenue.  They  certainly  should  not  be  intensified  by  enacting 
into  law  dangerous  and  experimental  theories  which  would  inevitably  fur- 
ther depress  real  estate  values  and  also  cripple  the  city's  borrowing  capacity 
which  depends  upon  their  maintenance.  The  agitation  fathered  by  the 
advocates  of  single-tax  theories  under  the  guise  of  halving  the  rate  of 
taxation  upon  improvements  with  a  resulting  proportionate  increase  upon 
land  values  is  but  the  initial  step  leading  to  a  practically  complete  con- 
fiscation of  the  net  income  from  real  estate.  The  aim  of  many  of  the 
advocates  of  this  plan  appears  to  be  to  first  establish  the  principle,  and 
then,  by  means  of  a  gradual  increase  in  the  rate,  to  concentrate  taxation 
upon  land,  with  the  result  of  depriving  the  owners  thereof  of  any  sub- 
stantial net  income. 

Theoretically,  the  scheme  has  an  alluring  sound,  as  have  had  many 
others  equally  visionary.  It  has  been  plausibly  advocated,  and  has  misled 
many  worthy  citizens  into  favoring  it  who  have  not  appreciated  the  unfor- 
tunate results  which  its  practical  operation  would  inevitably  produce.     If 

342 


11 


adopted,  it  would  cause  a  wholesale  calling  of  mortgages  by  the  holders 
thereof,  including  savings  banks,  life  insurance  companies,  trust  companies 
and  others.  Real  estate  held  by  most  owners  is  mortgaged.  Generally 
speaking,  the  owners  hold  only  an  equity,  and  do  not  possess  the  means 
to  improve  their  property.  The  almost  complete  destruction  of  confidence 
in  land  values  which  would  result  from  the  proposed  legislation  would 
render  it  difficult  and,  in  most  cases,  impossible  for  them  to  borrow  money 
for  new  construction.  To  put  greater  burdens  of  taxation  upon  land  than 
now  exist  would  simply  break  down  its  value  and  would  not,  generally 
speaking,  force  improvement  of  it  where  there  was  not  demand  for  occu- 
pancy. The  argument  that  it  would  cause  wholesale  improvement  of  land 
now  vacant  is  fallacious.  In  New  York  City,  at  least,  production  has 
almost  invariably  greatly  outstripped  demand.  The  present  high  rate  of 
taxation  with  assessments  at  full  value  is  more  than  a  sufficient  incentive 
to  cause  improvement  where  a  real  demand  exists.  The  effect  of  the  pro- 
posed measure  would  be  to  concentrate  future  improvement  in  the  more 
congested  districts  by  forcing  a  more  intensive  use  of  the  land. 

I  believe  that  the  improvement  of  land  which  would  be  artificially 
stimulated  elsewhere  would  be  less  in  volume  in  the  aggregate  than  the 
reduction  of  improvement  which  would  result  from  the  increased  difficulty 
of  borrowing  money  upon  mortgage  for  the  purpose  of  improvement- 
Such  amount  of  building  as  the  proposed  law  might  be  likely  to  stimulate 
in  the  less  congested  districts  would  consist  principally  of  lemporar}- 
buildings,  largely  shacks  or  "taxpayers,"  which  would  impair  the  future 
of  the  neighborhood  and  retard  a  substantial  and  proper  development.  If 
such  a  law  had  existed  thirty  years  ago,  it  seems  almost  clear  that  we 
should  not  now  have  great  and  splendidly  improved  thoroughfares  like 
Fifth  Avenue  and  Broadway.  The  net  result  of  the  proposed  legislation 
would,  in  my  judgment,  be  some  stimulation  of  improvement  where  it  is 
least  desirable,  and  a  curtailment  of  the  normal  and  desirable  improve- 
ment in  less  congested  locations  to  an  extent  probably  greater  than  the 
amount  of  building  stimulated  thereby;  and  labor  would,  I  predict,  find 
cornparatively  little  employment  during  the  painful  period  of  readjustment 
which  would  ensue  if  single-tax  theories  were  incorporated  into  law. 

Such  legislation  would  also  produce  financial  chaos  in  the  city's  affairs, 
and  make  it  at  least  technically  insolvent  through  a  reduction  of  its  assessed 
valuations.  This  would  probably  result  in  a  clamor  for  the  removal  or 
modification  of  the  present  legal  limitations  of  the  city's  debt-incurring 
power,  now  limited  to  ten  per  cent,  of  its  assessed  valuations.  Should 
that  safeguard  against  expansion  of  debt  be  removed,  a  broad  road  to 
unbridled  public  extravagance  would  be  opened  which  could  lead  only  to 
eventual  and  actual  financial  bankruptcy. 

The  axiomatic  wisdom  of  not  killing  the  goose  that  lays  the  golden 
egg  is  peculiarly  pertinent  to  the  existing  situation,  and  it  is  unbelievable 
that  the  great  State  of  New  York  could  be  guilty  of  the  extreme  folly 
of  passing  legislation  which  would  inevitably  break  down  the  values  of  its 
real  estate,  which  have  been  the  most  important  source  of  its  revenues 
for  taxation  and  the  rock-ribbed  bulwark  of  its  credit.  There  is  impera- 
tive need  to  reassure  both  institutions  and  individuals  who  loan  money  on 
mortgage  that  financial  hari-kari  is  not  to  be  committed  through  the 
passage  of  the  proposed  legislation. 

It  has  been  suggested  that  where  the  cost  of  improvement  exceeds 
land  value,  the  owners  of  such  property  would  be  benefited  by  the  proposed 
legislation.  Possibly  in  a  few  isolated  cases  like  the  towering  Woolworth 
Building,  the  first  effect  might  be  beneficial   to  them;  but   in  the  last 

343 


I 


f 

i  $  I 


I" 


''■I 


V 


analysis  it  seems  clear  that  the  resulting  general  depression  in  real  estate 
values  would  outweigh  many  times  the  benefits  which  a  few  owners  might 
temporarily  obtain. 

I  believe  the  adoption  of  legislation  embodying  single-tax  theories, 
whether  partially  or  wholly,  would  be  ethically  wrong  and  entirely  con- 
tradictory to  the  American  spirit  of  fairness.  If  the  ownership  of  land 
were  entirely  vested  in  the  government,  there  might  be  ethical  justification 
for  the  proposed  measures;  but  remembering  that  the  great  majority  of 
the  people  who  now  own  land  have  paid  for  it  with  their  hard-earned 
money  (and  probably  most  of  them  have  paid  at  least  as  much  or  more 
than  it  could  be  sold  for  today  because  of  the  depression  in  land  values  of 
the  last  few  years),  it  should  be  obvious  that  the  proposed  legislation 
infringes  not  only  upon  the  Golden  Rule,  but  would  perhaps  also  consti- 
tute a  violation  of  the  eighth  commandment. 

As  to  the  proposed  increment  tax,  while  I  believe  the  adoption  of 
this  would  be  unwise,  it  would  certainly  be  less  objectionable  than  the 
single-tax  propaganda,  because  the  additional  tax  would  fall  upon  those 
who  are  better  able  to  pay  it,  and  would  not  result  in  wholesale  confiscation. 
An  increment  tax  to  be  fair,  however,  should  work  both  ways  and  pro- 
vide for  refunds  where  values  fall  as  well  as  to  impose  additional  burdens 
where  they  rise.  In  New  York  City,  at  least,  the  nimble  tax  assessor  seems 
to  have  made  an  increment  tax  totally  unnecessary,  as  it  has  been  the 
practice  to  discount  the  future  where  it  was  anticipated  land  values  would 
rise,  and  in  many  cases  to  overdiscount  it.  I  know  of  real  properties  in 
Manhattan  which  have  been  recently  sold  at  about  sixty  per  cent,  of  the 
existing  assessed  valuations. 


I 


TESTIMONY  OF  MR.  JESSE  F.  ORTON. 

MR.  ORTON:  In  the  time  at  my  disposal,  I  have  thought  it  most 
profitable  to  take  up  what  seemed  to  me  most  important  in  the  excellent 
list  of  questions  propounded  by  the  Committee.  I  shall  assume  that  the 
economic  distinctions  between  a  tax  upon  a  building  and  a  tax  upon  land 
have  already  been  sufficiently  emphasized  and  are  recognized  by  the  Com- 
mittee. I  refer  to  the  principles  that  a  tax  upon  land,  according  to  its 
selling  or  rental  value,  is  paid  by  the  owner  and  not  by  the  tenant  or  user, 
while  a  tax  upon  a  building,  being  one  of  the  costs  of  producing  the 
building  for  the  use  of  its  ultimate  consumer,  the  tenant,  is  paid  by  the 
tenant. 

Recognition  of  this  principle  is  not  inconsistent  with  the  fact  that 
a  tax  levied  upon  an  improved  parcel  of  land  has,  in  itself,  the  same 
effects,  whether  v^e  call  it  a  tax  upon  the  building  or  upon  the  land,  or 
upon  both.  The  important  point  is  that  no  tax  upon  an  improved  house 
is  a  separate  thing,  to  be  considered  in  and  of  itself.  It  is  a  part  of  a  sys- 
tem of  taxation  by  which  land,  improved  and  unimproved,  is  taxed  accord- 
ing to  its  value,  and  a  building,  when  erected,  adds  its  value  to  the 
taxable  value  of  the  parcel  of  which  it  becomes  a  part. 

In  answer  to  the  question  whether  a  transfer  of  a  tax  now  levied  on 
buildings  to  land  will  in  any  instance  increase  the  value  of  improved  land, 
I  would  say  that  unquestionably  the  direct  effect  of  such  a  change  will 
be  an  increase  in  the  value  of  the  land,  where  the  value  of  the  building, 
as  compared  with  that  of  the  land,  is  sufficient  to  make  the  tax  on  the 
entire  property  less  after  the  change  than  it  was  before  the  change. 

344 


To  use  the  illustration  mentioned  in  the  question,  if  the  building  be 
worth  $70,000  and  the  land  $30,000,  as  the  total  improvement  value  in 
the  city  is  less  than  the  total  land  value,  the  immediate  eft'ect  is  a  consider- 
able reduction  in  the  owner's  tax.  This  reduction  will  show  itself  in  an 
increased  capital  value  of  the  parcel  as  a  whole.  But  the  building,  depend- 
ing for  its  value  upon  the  reproduction  cost  of  similar  buildings,  will  be 
worth  no  more  than  before;  and  therefore  the  increased  value  of  the 
parcel  must  be  the  result  of  greater  value  of  the  land. 

To  what  extent  this  direct  result,  an  increase  in  the  land  value,  will 
be  neutralized  by  the  indirect  effects  of  the  change,  by  which  other  land, 
formerly  unused,  is  brought  into  competition  with  the  parcel  in  question, 
is  a  matter  which  cannot  be  accurately  determined.  But  I  believe  that  a 
very  large  proportion  of  parcels  of  adequately  improved  land  will,  at  least, 
suffer  no  diminution  in  selling  value. 

In  answer  to  the  questions  relating  to  the  effect  of  attracting  buildings 
upon  speculation  in  land,  I  believe  that  the  direct  effect  will  be  to  check 
very  decidedly  so-called  speculation  in  land,  by  which  I  mean  the  purchas- 
ing of  land  for  the  purpose  of  holding  it  idle  until  its  increased  value  will 
•return  a  profit  over  and  above  taxes  and  interest  on  the  purchase  price. 
I  would  consider  this  a  beneficial  result.  Speculation  in  land  raises  its 
price  above  that  where  it  was  kept  by  its  present  utilities,  basing  values 
on  expected  or  fancied  utility  in  the  future.  It  serves  no  useful  purpose 
to  the  community,  but  is  a  detriment,  keeping  land  out  of  use  because  its 
price  is  too  high  to  afford  a  profit  for  industry  under  present  conditions. 
It  is  wholly  unlike  speculation  in  the  product  of  labor,  which  tends  to 
equalize  prices  over  periods  of  scarcity. 

Unquestionably,  the  direct  result  of  the  untaxing  of  buildings  would 
be  to  reduce  land  values,  except  in  cases  of  parcels  so  well  improved  that 
the  land  alone,  at  the  increased  tax  rate,  would  pay  no  more  than  both  land 
and  building  formerly  paid.  The  indirect  effect,  assuming  that  population 
is  not  attracted  from  outside  the  city,  would  be  to  reduce  still  further 
land  values  through  the  competition  resulting  from  the  improvement  of 
land  now  vacant  or  inadequately  improved.  Along  with  this  reduction 
of  land  value,  would  go  a  reduction  in  rent,  with  the  result  that  labor  and 
industry  would  get  a  larger  share  in  the  distribution  of  wealth. 

As  to  the  effect  of  the  change  on  the  city's  revenue,  it  is  plain  that 
taxable  land  value  being  reduced  in  the  aggregate,  if  the  city  budget  wert 
not  reduced  by  this  change  and  if  other  sources  of  revenue  were  not 
utilized,  the  increase  in  the  tax  rate  would  be  somewhat  more  than  the 
increase  strictly  called  for  by  the  transfer  of  taxes  from  buildings  to 
land. 

The  objection  has  been  made  that  the  tax  rate  would  have  to  be 
so  much  higher  as  to  cause  a  failure  to  obtain  the  needed  revenue.  I 
think  we  shall  see  later  that  one  of  the  results  of  the  change  will  be  to 
reduce  very  materially  the  city's  budget  below  what  it  would  otherwise 
be.  It  is  also  true  that  other  sources  of  revenue  can  be  found.  I  be- 
lieve that  other  sources  should  be  utilized,  if  necessary,  during  the  period 
when  conditions  are  becoming  readjusted  to  the  change  in  taxing  real 
estate. 

If  the  transfer  of  taxes  from  buildings  to  land  is  made  gradually,  as 
proposed,  covering  a  period  of  ten  years,  I  do  not  believe  other  sources 
of  revenue  will  be  necessary,  considering  the  economy  in  city  government 
which  would  be  possible  as  a  result  of  the  change.  There  would  be  forces 
immediately  set  to  work  to  sustain  the  value  of  land.  Cheaper  sites  invite 
improvements,  invite  the  starting  of  industries  which  would  employ  un- 

a45 


11 


iU 


1 


91 


■ 


li 


!  I 


li 


Ij 


employed  labor  and  capital  already  in  the  city,  and,  in  addition,  those  sites 
and  untaxed  buildings  invite  the  bringing  of  industries  from  outside  the 
city.  Thus  the  lowering  of  land  values  through  taxation  tends,  in  part, 
to  be  counteracted  by  forces  set  in  motion  by  the  reduction  itself. 

In  answer  to  the  question  concerning  the  effect  of  the  change  on  the 
tax  paid  by  buildings  of  the  skyscraper  class,  I  i>elieve  that,  in  many  cases, 
the  property  would  pay  less  taxes  than  it  does  now,  especially  where  the 
value  of  the  building  is  higher  in  proportion  to  the  value  of  the  land.  But 
this  gain  would  not  necessarily  mean  that  much  additional  profit  to  the 
owner.  Since  the  tax  on  buildings  is  in  the  long  run  paid  by  tenants,  the 
actual  or  potential  competition  of  similar  buildings,  whose  maintenance 
would  involve  no  charge  for  taxation,  would  gradually  transfer  to  the 
tenants  the  advantage  resulting  from  the  removal  of  taxes  from  the  exist- 
ing buildings. 

In  reply  to  the  questions  relating  to  the  effect  of  the  proposed  change 
on  the  compactness  of  the  city's  environments,  and  on  the  necessity  for 
restriction  of  the  height  of  buildings,  etc.,  I  would  say  that  the  change 
would  undoubtedly  cause  a  more  intensive  use  of  land  in  th(;  central  or 
the  business  districts.  Such  land  now  vacant  or  inadequately  improved 
would  be  built  upon  and  the  tendency  to  high  buildings  might  in  some 
localities  be  increased.  It  would  be  advisable,  if  not  necessary,  for  the 
city  to  make  suitable  restrictions  on  the  height  of  buildings  and  on  the 
ratio  of  buildings  to  lot  area.  But  this  ought  to  have  been  done  long  ago, 
under  present  conditions  of  taxation,  for  a  number  of  reasons  that  might 
be  mentioned. 

As  a  result  of  the  more  compact  development  of  the  city,  certain 
vacant  areas  which  have  served  after  a  fashion  for  breathing  spaces  or 
in  lieu  of  parks  and  playgrounds,  would  be  occupied  with  buildings.  In 
some  cases  it  might  be  necessary,  as  a  consequence,  for  the  city  to  acquire 
land  for  some  of  these  public  purposes.  I  believe  that  this  is  not  to  be 
regretted.  It  is  most  unfortunate  that  any  city  relies,  or  attempted  to 
rely,  upon  these  vacant  spaces  which  happen  to  be  left  for  a  time.  The 
result  of  reliance  upon  them  is  that  the  city  neglects  to  acquire  the  land 
needed  for  parks  and  other  public  purposes  when  the  cost  of  acquisition 
would  be  low,  and  is  reminded  of  its  need  only  when  the  private  owners 
of  the  vacant  land  get  ready  to  improve  it;  then  the  city  may  find  it 
impossible  to  obtain  the  required  land,  or  may  have  to  pay  a  very  high, 
price,  or,  in  many  cases,  may  have  to  purchase  improved  land  and  dispose 
of  the  improvements  before  it  can  make  use  of  the  land. 

It  should  also  be  remembered  that  if  the  untaxing  of  buildings  does 
deprive  the  city  of  some  breathing  spaces  which  it  now  enjoys  without 
public  expense,  and  if  it  does  make  necessary  the  acquisition  of  land  as 
public  parks  to  supply  the  need  of  such  space,  it  will  at  the  same  time 
save  to  the  city  large  sums  of  money  in  condemnation  proceedings,  by 
which  land  is  acquired  for  other  public  purposes.  If  the  speculative 
element  is  taken  out  of  the  price  of  land,  or  if  land  values  are  still  further 
reduced,  the  city  will  pay  much  less  for  the  land  which  it  condemns  or 
purchases.  I  believe  the  net  result  on  this  account  will  be  a  gain  rather 
than  a  loss  to  the  city. 

As  to  the  effect  of  the  proposed  change  upon  the  maintenance  of 
lawns  and  gardens  in  the  suburban  districts,  I  have  no  doubt  it  will 
greatly  encourage  residents  of  outlying  and  suburban  localities  to  provide 
and  maintain  suitable  lawns  and  gardens.  While  the  effect  of  the  change 
would  be  to  make  the  city  compact  in  the  high-priced  business  districts, 
and  to  eliminate  the  magnificent  distances  over  which  one  must  often 

346 


travel,  through  vacant  or  half  vacant  areas,  between  business  and  resi- 
dence, the  effect  in  the  outer  portions  of  the  city  would  be  to  make  land 
enough  cheaper  than  it  is  now  to  enable  residents  to  maintain  lawns 
and  gardens  where  now  they  cannot  afford  it.  For  obvious  reasons,  I 
believe,  this  would  be  a  good  thing. 

In  reply  to  the  general  question  whether  the  untaxing  of  buildings 
would  encourage  the  making  of  improvements,  whether  it  would  encourage 
the  building  of  larger  and  more  commodious  buildings,  whether  it  would 
encourage  the  building  of  temporary  improvements  while  land  is  awaiting 
its  permanent  use,  I  think  unquestionably  the  answer  would  be  in  the 
affirmative,  and  that  the  building  of  new  and  better  buildings  must  gradu- 
ally, but  surely,  force  the  abandonment  of  old  and  unfit  buildings,  just  as 
a  cheaper  supply  of  clothing  will  tend  to  the  discarding  of  old  and  ragged 
garments. 

Some  persons  doubt  the  possibility  of  getting  capital  for  the  making  of 
these  improvements.  But  the  doubt  is  not  justified;  capital  flows  naturally 
wherever  profits  may  be  expected.  Under  present  conditions,  capital  is 
constantly  being  devoted  to  the  making  of  improvements.  It  is  absurd 
to  imagine  that  when  it  is  made  less  profitable  to  hold  land  idle  than  it 
is  now,  and  more  profitable  to  improve  land  than  it  is  now, 
capital  will  be  less  willing  than  now  to  furnish  the  money  for  the 
operation.  Building  loans  will  be  made  on  locations  which  are  favorable 
for  improvement,  though  the  selling  value  may  be  somewhat  reduced.  I 
do  think,  however,  that  some  of  our  friends  who  are  planning  so-called 
self -development  improvements  on  land  seventeen  miles  from  nowhere, 
land  which  should  be  used  for  a  long  time  to  come  in  the  raising  of  com 
arid  potatoes,  will  find  it  somewhat  harder  to  obtain  building  loans  than 
they  do  now. 

The  giving  of  additional  employment  for  labor  and  industry,  in  the 
improvement  of  land,  is  only  one  of  the  beneficial  results  that  may  be 
expected  from  the  removal  of  taxes  from  buildings.  Another  important 
result  is  the  relief  of  congested  centres  of  population,  through  the  offering 
of  cheaper  homes  than  can  now  be  obtained  in  those  parts  of  the  city 
where  space,  light  and  air  are  more  plentiful.  General  encouragement  of 
industry  will  follow  the  change,  by  untaxing  the  improvement  which  is 
much  used  and  by  offering  a  cheaper  site  or  lower  rent  for  the  land  which 
it  needs.  In  a  word,  the  size  and  number  of  unearned  incomes  will  be 
reduced,  while  the  size  and  number  of  earned  incomes  will  be  increased. 

I  believe  the  change  will  result  in  great  economy  of  public  money,  and 
in  certain  reductions  in  the  cost  of  living.  The  making  of  the  city  more 
compact  would  undoubtedly  reduce  the  expense  of  the  Police  and  Fire 
Departments  and  some  other  government  services.  It  will  also  lower  the 
cost  of  maintaining  transportation  lines,  the  pipes  and  wires  of  public 
utilities,  and  other  services  of  a  semi-public  or  private  nature.  Of  course, 
the  City  of  New  York  cannot  get  the  full  benefit  of  these  savings  which 
could  have  been  had  by  an  earlier  resort  to  the  measures  now  proposed. 
But  a  large  portion  of  benefit  can  still  be  obtained  by  encouraging  the  fill- 
ing in  of  the  unoccupied  spaces  which  now  exist,  before  further  expansion 
and  scattering  of  population  occurs.  In  this  way  the  growth  of  the  city's 
budget  may  be  checked  and  the  problem  how  to  obtain  revenue  be  made 
less  serious. 

The  answer  to  the  question  whether  the  untaxing  of  buildings  would 
attract  population  and  industry  to  New  York  from  other  localities,  I  think, 
must  obviously  be  in  the  affirmative.    People  are  not  coming  to  New  York 

347 


II 


il 


hi 


ii 


r  1 


under  present  conditions  for  the  purpose  of  residence  or  to  engage  in 
industry. 

To  deny  that  cheaper  sites  and  exemption  of  improvements  from 
taxation  will  be  an  added  attraction  and  increase  the  number  of  those  who 
come,  is  equivalent  to  denying  that  water  will  run  down  hill.  Unless 
other  neighboring  communities  take  their  cue  from  the  experience  of  New 
York  and  promptly  exempt  improvements  from  taxation,  this  movement 
toward  New  York  will  surely  be  of  considerable  importance,  and  to  a  cer- 
tain extent,  by  increasing  the  demand  for  land  within  the  city,  it  would 
neutralize  the  effect  of  transferring  taxes  from  buildings  to  land.  The 
opponents  of  the  measure  should  get  at  least  this  comfort  out  of  the  situ- 
ation. 

In  answer  to  the  question  relating  to  the  efFect  of  untaxing  buildings 
on  mortgage  loans,  existing  and  contemplated,  I  would  say  that  I  believe 
no  confidence  should  be  placed  in  certain  estimates  which  have  been  placed 
before  the  Committee. 

The  statement  that  nearly  all  parcels  of  land  are  mortgaged,  and  that 
in  most  cases  the  owner  has  so  small  an  equity  that  his  interest  would  be 
wiped  out  by  the  decrease  in  land  value,  resulting  from  the  proposed 
change,  is  so  extravagant  as  to  be  its  own  refutation. 

Savings  banks  are  allowed,  by  law,  to  loan  not  more  than  sixty  per 
cent,  of  the  value  of  improved  property  and  forty  per  cent,  in  case  of 
unimproved  property.  Other  loaning  agencies,  while  not  subject  to  this 
law,  follow  much  the  same  practice  for  their  own  protection.  Undoubtedly 
some  equities  are  being  wiped  out  every  year  under  existing  conditions. 
This  always  occurs  under  any  system  of  taxation.  The  increasing  of  taxes 
on  lands,  which  are  unimproved  or  quite  inadequately  improved,  would, 
of  course,  accelerate  the  tendency  for  equities  to  disappear  in  the  more 
unfavorable  locations.  But,  as  I  have  indicated  in  considering  an  earlier 
question,  I  believe  that  in  case  of  parcels  of  land  which  are  adequately 
improved  and  in  which  the  value  of  the  building  exceeds  the  value  of  the 
land,  the  direct  result  of  the  untaxing  of  buildings  is  to  increase  the  selling 
value  of  the  parcel  as  a  whole. 

This  direct  result  may  be  neutralized  in  some  measure  by  the  indirect 
effects  of  the  change,  the  bringing  of  the  land  now  vacant  into  competition 
v.ith  the  parcels;  but  I  believe  that  parcels  of  land  which  are  now  adc- 
aiiately  improved  with  buildings,  at  least  equal  in  value  to  the  land,  would 
be  practically  free  from  danger  of  having  the  owners'  equities  wiped  out 
by  falling  values,  except  in  cases  where  these  properties  have  been  mort- 
gaged with  utter  recklessness  on  the  part  of  the  mortgagee  as  well  as  the 
owner,  or  in  cases  where  the  shifting  of  land  values,  due  to  causes  other 
than  the  proposed  change  in  taxation,  would  have  made  the  loss  of  the 
property  on  foreclosure  inevitable  under  present  conditions. 


TESTIMONY  OF  DAVID  A.  CLARKSON, 

Member,  Legislation  and  Taxation  Committee,  Real  Estate  Board  of 

New  York. 

MR.  CLARKSON:  It  is  my  purpose  to  consider  what  would  be 
the  effects  upon  real  estate  of  the  adoption  of  the  plan  of  removing 
taxes  on  buildings  during  ten  years  and  placing  them  on  land  until 
the  tax  rate  on  buildings  would  be  one  per  cent,  of  that  on  land.  This 
change  is  shown  by  Dr.  Haig  in  his  report  to  the  Committee  on  Taxa- 
tion, on  the  basis  of  the  taxes  levied  for  1914,  to  increase  the  amount 


to  be  raised  on  land  values  in  the  City  of  New  York  from  $84,007,000 
to  $135,988,000,  an  additional  burden  on  land  of  $57,000,000  in  round 
numbers;  and  in  the  Borough  of  Manhattan  from  $56,000,000  to  $92.- 
000,000,  an  increase  of  $35,000,000  in  taxes  on  land.  The  increase  in 
the  rate  of  taxation  in  this  borough,  as  calculated  by  Dr.  Haig,  would 
be  from  1.77  per  cent,  to  2.86  per  cent,  on  land.  This  additional  burden 
of  $35,000,000  capitalized  at  5  per  cent,  equals  $700,000,000,  the  amount 
by  which  land  values  in  that  borough  would  be  depreciated  unless  for 
other  reasons  the  land  values  would  increase  by  an  equivalent  amount. 
When  we  consider  that  these  values,  as  measured  by  the  assessments 
of  the  Tax  Department,  for  Manhattan,  increased  only  from  $2,600,000,- 
000  in  1906  to  $3,184,000,000  in  191 5,  an  increase  of  $584,000,000  in  ten 
years,  including  a  change  in  the  scale  of  valuation  in  191 1,  which 
accounts  for  nearly  $200,000,000  of  the  increase,  it  is  inconceivable  that 
land  values  should  not  be  largely  depreciated. 

This  is  the  more  true  if  we  take  into  account  the  probable  increase 
in  the  rate  of  taxation  for  1916,  on  the  basis  of  which  the  capitalized 
depreciation  would  be  about  sixteen  per  cent,  greater,  or  about  $810,- 
000,000.  Is  it  to  be  presumed  that  in  the  present  condition  of  affairs  in 
the  world  that  any  such  increase  in  values  can  be  looked  for  here?  It, 
therefore,  seems  assured  that  by  the  adoption  of  the  plan  of  untaxing 
buildings  the  value  of  land  would  be  greatly  depreciated. 

Let  us  now  consider  what  effect  the  untaxing  of  buildings  would 
have  upon  rents.  While  the  removal  or  gradual  removal  of  taxes  would 
seem  to  encourage  building,  and  thereby  lower  rents,  yet  there  are  other 
influences  which  would  work  strongly  against  this  tendency  in  New 
York  City.  It  has  not  been  the  custom  of  owners  here  to  set  aside 
funds  for  the  depreciation  of  their  buildings,  as  they  have  looked  to 
the  increase  of  land  values  to  compensate  them  for  this  loss;  therefore, 
it  is  reasonable  to  presume  that  rents  have  been  lower  than  if  such 
depreciation  had  been  charged  to  the  annual  income.  Buildings  have 
usually,  in  New  York,  been  erected  in  anticipation  of  the  demand,  and 
at  present  there  are  many  only  partially  rented. 

Building  operations  have  usually  been  carried  on  here  by  those  v.ho 
expect  to  sell  the  completed  and  rented  buildings.  These  operations 
are  usually  financed  by  a  system  of  loans  by  which  money  is  advanced 
during  construction.  In  the  face  of  falling  land  values  and  doubtfui 
ability  to  sell  the  finished  buildings  at  a  profit,  it  is  certain  that  neither 
would  these  loans  be  made,  nor  the  operations  undertaken  on  the  same 
scale.  These  conditions  would  go  far  to  counteract  the  incentive  to 
erect  new  buildings,  caused  by  the  removal  of  taxes,  and  would,  I 
believe,  for  years  overcome  it.  Unless  new  buildings  were  put  up  more 
largely  than  at  present,  rents  would  not  tend  to  decrease.  It  is  most 
difficult  to  estimate  the  result  of  these  conflicting  tendencies,  but,  in 
my  opinion,  it  would  take  years  for  the  removal  of  taxes  on  buildings 
effectively  to  lower  rents,  while  there  is  no  doubt  but  that  it  would 
much  decrease  land  values,  especially  in  the  case  of  vacant  lots. 

This  decrease  would  cause  an  entire  change  in  the  city's  present 
financial  system,  which  is  based  on  the  assessment  of  land  and  building 
values.  It  would  diminish  the  tax  base  and,  in  the  face  of  increasing 
expenditures,  would  result  in  a  constantly  increasing  tax  rate,  which 
would  tend  as  constantly  to  diminish  land  values.  The  city's  borrow- 
ing capacity  would  be  taken  away  and  financial  confusion  ensue. 

349 


I 

i 


\ 


II 


I' 


MR.  JOSEPH   L.   BUTTENWIESER, 

Member,  Legislation  and  Taxation  Committee,  Real  Estate  Board 

of  New  York. 

MR.  BUTTENWIESER:  I  desire  to  register  my  strong  dis- 
approval of  this  proposed  measure,  not  only  l)ecause  it  will  hurt  all 
real  estate  owners,  but  also  because  you  will  be  disturbing  the  entire 
financial  system.  We  must  not  lose  sight  of  the  fact  that  the  whole 
structure  of  our  municipal  credit  has  been  built  upon  the  value  of  its 
real  estate  and  that  over  75  per  cent,  of  the  revenue  for  the  support  o^ 
the  city  government  is  derived  from  the  tax  on  real  estate.  Vancouver 
has  been  repeatedly  cited  by  the  other  side  in  support  of  untaxing 
buildings.  I  have  just  come  from  across  the  hall,  where  I  attended 
the  meeting  of  the  Mayor's  Committee  on  National  Defense.  When 
I  told  Mr.  Alrick  H.  Man  that  I  had  to  leave  to  testify  before  your  hon- 
orable body,  he  told  me  that  he  had  only  recently  returned  from  Van- 
couver, and  that  while  riding  there  in  the  bus  from  the  depot  to  the 
hotel,  he  noticed  a  sign  "For  sale  at  your  own  price."  He  was  informed 
that  $2,000  would  be  accepted  for  this  property,  for  which  but  a  few 
years  before  $44,000  had  been  offered.  That  is  the  true  result  of  this 
much-vaunted  boon  to  Vancouver. 

PROFESSOR  SELIGMAN :  You  are  interested  primarily  in  real 
estate  speculation,  in  building  operations  or  in  lending  money? 

MR.  BUTTENWIESER:  My  line  is  especially  that  of  the  real 
estate  operator  and  builder.     I  have  built  about  300  houses  in  this  city. 

PROFESSOR  SELIGMAN :  From  the  point  of  view  of  the  operator 
would  you  say  that  in  general  the  business  of  the  real  estate  operator 
is  exceptionally  prosperous? 

MR.  BUTTENWIESER:  I  may  say  that  it  has  been  no  more 
so,  and  possibly  less  so,  than  other  lines  of  business  in  the  City  of 
New  York.  It  is  far  more  unstable,  but  yet  as  proper  as  any  regular 
business. 

PROFESSOR  SELIGMAN:  Do  you  believe  that  all  the  taxes 
and  expenditures  of  this  city  go  to  the  sole  profit  of  the  land  owner 
and  speculator,  and  that  they  are  the  favored  class  in  this  community? 

MR.  BUTTENWIESER:    Absolutely  no. 

PROFESSOR  SELIGMAN:  The  argument  made  by  the  gentle- 
men who  took  the  other  view  is  that  while  all  these  things  seem  to  be 
a  benefit  to  the  community  at  large,  in  reality  they  are  to  the  advantage 
of  the  land  owners,  and  that  the  land  owners  increased  the  rent  because 
of  such  improvements.  I  should  like  to  know  what  your  point  of 
view  is? 

MR.  BUTTENWIESER:  These  improvements  have  no  more 
been  the  cause  of  the  increase  in  rents  than  they  have  been  the  cause  of 
the  increases  or  developments  that  are  natural  in  a  great  and  growing 
city. 

PROFESSOR  SELIGMAN:  In  other  words,  the  benefit  of  the 
city  taxation  and  city  debt  accrue  to  labor  and  industry  no  less  than 
to  land,  because  it  increases  their  opportunity  of  making  good? 

MR.  BUTTENWIESER:  I  should  say  more  so.  They  accrue 
more  to  labor  and  industry  because  the  land  owner  must  continue  to 
pay  the  tax  irrespective  of  whether  the  prospective  profit,  which  had 

350 


I: 


tempted  him  to  put  money  into  land,  materializes  or  not.  Labor  and 
industry  can  go  elsewhere,  if  disappointed.  The  land  owner  must  stand 
by,  and  continue  to  pay  taxes  on   his  land,  or  else  lose  it  altogether. 

PROFESSOR  SELIGMAN:  Would  you  think,  Mr.  Butten- 
wieser,  that  the  general  tendency  of  the  untaxing  of  buildings  would 
be  to  reduce  rents? 

MR.  BUTTENWIESER:  It  will  generally  upset  things.  It  may 
temporarily,  but  cannot  permanently,  reduce  rents.  Of  course,  in  so 
far  as  the  proposed  measure  would  unsettle  conditions,  and  in  so  far  as 
It  might  stimulate  additional  building  during  the  first  few  years  of  the 
operation  of  the  law,  the  tendency  would  be  somewhat  to  reduce  rents. 
No  man,  however,  is  fool  enough  to  put  his  money  into  any  venture 
where  there  is  no  prospect  of  remunerative  return  and  where  he  is 
certain  to  lose  money.  Rents  would  then  naturally  rise  again.  The 
question  of  rent  is  governed  by  the  law  of  supply  and  demand.  By 
artificial  means  you  may  temporarily  arrest  the  operation  of  this  law. 
but  in  the  end  this  law  must  prevail. 

May  I  here  interject  another  remark?  It  is  quite  true  that  every 
economist,  in  writing  on  the  incidence  of  taxation,  maintains  that  you 
cannot  shift  the  burden  of  taxation  from  the  land.  I  hold  that  this  applies 
primarily  to  virgin  land.  When,  however,  you  improve  the  land  and 
have  the  building  and  land  as  one  parcel  of  real  estate,  you  can  no  longer 
be  sure  of  shifting  the  tax  on  the  building  and  not  shifting  the  tax  on 
the  land.  They  are  a  unit— a  new  unit.  It  is  just  the  same  as  if  you 
attempted  to  keep  separate  and  distinct  the  tax  on  the  cotton,  the  labor, 
the  dye,  the  bleaching,  the  printing,  etc.,  in  a  yard  of  cotton  cloth.  You 
have  blended  them  altogether  into  a  new  unit,  which  you  must  and  do 
tax  as  a  unit.  So,  too,  in  improved  real  estate  you  have  a  new  unit, 
and  the  tax  on  that  new  unit  can,  to  a  certain  extent,  be  shifted, 
whether  you  tax  the  land  or  the  building  or  both. 

PROFESSOR  SELIGMAN:  If  the  tax  on  land  can  be  shifted, 
how  then  would  it  bring  the  decreased  value  of  land  to  which  you  are 
referring  in  saying  that  the  owner  is  unjustly  treated  because  the  tax 
is  shifted  or  is  capitalized  into  lower  selling  value? 

MR.  BUTTENWEISER:  I  maintain  that  in  the  case  of  improved 
real  estate,  if  you  were  to  tax  the  land  only,  you  can  shift  the  tax  to  a 
certain  extent.  Of  course,  if  you  unduly  tax  anything— land  or  build- 
ing or  anything  else — you  can  no  longer  shift  the  tax,  but  you  reach  a 
point  where  the  tax  is  taken  out  of  the  capital,  that  is  to  say,  you  lessen 
the  capital  value.  That  is  what  will  and  does  happen  when  you 
over-tax  real  estate,  be  it  land  or  buildings  or  both.  I  think  you  have 
a  fair  illustration  of  that  in  the  present  condition  of  the  real  estate 
market.  You  have  piled  taxes  upon  real  estate  to  a  point  where  the 
tax  cannot  be  shifted,  but  naturally,  therefore,  reduces  the  capital  value. 

.       PROFESSOR  SELIGMAN:     Is  there  much  land  held  out  of  use? 

MR.  BUTTENWEISER:  There  is  very  little  held  out  of  use 
simply  for  speculative  purposes.  It  is  held  out  of  use  because  there  is 
no  demand  for  it. 

PROFESS9R  SELIGMAN:  Do  you  consider  the  business  of 
dealing  in  land  in  order  to  build — would  you  consider  that  a  productive 
enterprise? 

;i51 


HI 


I 


IM 


f 


MR.  BUTTENWIESER:  It  is  absolutely  as  productive  and  as 
important  to  the  growth  of  the  city  and  the  welfare  of  its  inhabitants 
as  any  manufacturing  industry. 

PROFESSOR  SELIGMAN:  You  would  not  concede  that  you 
represent  a  class  of  economic  parasites  on  the  community  and  of  those 
that  live  on  unearned  increment? 

MR.  BUTTENWIESER:  With  all  due  modesty,  I  claim  that 
there  is  no  line  of  business  more  directly  allied  with,  or  conducive  to, 
the  growth  of  the  city  than  that  of  the  operator  and  speculative  builder^ 
without  whose  activity  we  might  still  be  planting  potatoes  along  Broad- 
way and  some  of  the  other  important  streets  of  this  city. 

PROFESSOR  SELIGMAN:  You  think  that  the  operator  per- 
forms the  same  function  as  the  trader  in  the  stock  and  produce  ex- 
changes and  is  as  necessary  to  the  life  of  the  city? 

MR.  BUTTENWIESER:  Far  more  legitimate  and  just  as  neces- 
sary. 

DR.  WILCOX:  I  believe  you  said,  Mr.  Buttenwieser,  that  you 
did  not  expect  that  rents  would  decrease. 

MR.  BUTTENWIESER:  I  said  that  ultimately  rents  would  be 
determined  the  same  as  every  other  commodity,  by  the  laws  of  supply 
and  demand.  I  said  and  repeat  that  in  the  first  few  years  after  the 
enactment  of  your  law,  rents  may  be  temporarily  reduced,  due  to  the 
general  unsettling  of  conditions  in  real  estate. 

DR.  WILCOX:     Not  permanently? 

MR.  BUTTENWIESER :     No,  not  permanently,  only  temporarily. 

DR.  WILCOX :  Then  you  would  think — I  assume  you  would 
think  that  the  unsettling  of  values  and  the  harmful  eflfects  from  the 
standpoint  of  the  owner  of  real  estate  would  be  only  temporary? 

MR.  BUTTENWIESER:  The  reduction  in  rents,  if  any,  would 
be  temporary ;  the  unsettling  of  values  and  the  general  harmful  effects 
would  be  far  reaching  and  of  long  duration. 

MR.  LEUBUSCHER :  Are  you  aware  of  the  fact  that  real  estate 
in  1880  paid  87  per  cent,  of  the  budget,  while  in  191 5  it  paid  only  75 
per  cent? 

MR.  BUTTENWIESER:  If  that  be  so,  you  forget  that  to-day 
more  activities  are  being  carried  on  at  the  public  expense  and  that  there- 
fore real  estate  bears  a  larger  absolute  burden  than  it  ever  bore  before. 

MR.  LEUBUSCHER:  According  to  the  Tax  Department,  it 
bears  only  75  per  cent. 

MR.  BUTTENWIESER:  The  expenditures  for  city  government 
have  grown  from  1880  to  191 5  so  rapidly  that  real  estate  is  more  heavily 
taxed,  even  in  proportion,  at  75  per  cent,  in  191 5,  than  when  it  paid  87 
per  cent,  in  1880. 

MR.  LEUBUSCHER:  You  have  given  a  graphic  description  of 
Vancouver  and  pointed  to  a  piece  of  land  being  sold  at  a  high  price 
and  later  at  a  very  much  lower  price.  Do  you  not  know  of  any  similar 
instance  in  New  York  City? 

352 


14 


MR.  BUTTENWIESER:  I  know  where  values  went  dowu  in 
this  city. 

MR.  LEUBUSCHER:     Under  the  present  system? 

MR.  BUTTENWIESER:  I  know  of  depreciation  under  the  prcs« 
ent  system. 

MR.  LEUBUSCHER:     Twenty-third  Street  values? 

MR.  BUTTENWIESER:  Yes,  but  nothing  like  in  Vancouver 
nothing  like  the  ratio  of  $44,000  to  $2,0CX). 

MR.  LEUBUSCHER:  How  would  you  say  the  fortunes  of  the 
Astors,  the  Goelets,  the  Rhinelanders  and  the  Wendells  were  built  up? 

MR.  BUTTENWIESER:  In  the  first  place,  I  think,  the  Astor 
fortune  was  first  built  up  by  the  fur  trade.  He  used  his  surplus  money 
to  invest  in  one  way,  in  real  estate,  just  as  another  man  did  in  some 
other  way.  Now  you  cannot  take  him  as  an  example.  He  may  be 
one  out  of  ten  who  have  waxed  rich  by  real  estate  investments.  For 
every  one  whom  you  can  point  out  that  grew  rich  by  land  investments. 
I  will  point  out  twenty  who  have  found  them  to  be  a  graveyard,  as  far 
as  profits  go. 

MR.  LEUBUSCHER:  Are  you  aware  of  the  fact  that  the  studies 
of  the  Society  to  Lower  Rents  have  shown  that  ninety-nine  families 
own  one-seventh  of  the  land  values  of  Greater  New  York? 

•        PROFESSOR  SELIGMAN:     Is  that  a  fact,   Mr.   Marsh? 

MR.  MARSH:  One-ninth  of  Greater  New  York,  or  one-seventh 
of  Manhattan. 

MR.  LEUBUSCHER:  If  that  is  true— and  I  have  no  reason  to 
doubt  it — if  that  be  true,  does  it  not  show  that  the  holding  of  the  land 
of  Greater  New  York  is,  in  fact,  a  land  monopoly  or  trust  to-day? 

MR.  BUTTENWIESER:  Taking  it  for  granted  that  your  statis- 
tics are  correct,  I  should  say  that  it  would  depend  largely  on  what  they 
did  and  to  what  use  they  put  the  land.  If  I  found  that  they  did  not 
combine  to  establish  higher  rents,  that  they  did  not  keep  it  entirely 
vacant,  holding  it  purely  for  speculative  purposes,  that  the  ground  rents 
they  charged  were  on  a  4J4  per  cent,  or  5  per  cent,  basis  while  many 
others  insisted  upon,  and  got,  a  much  higher  rate  and  while  other  in- 
vestments produced  a  larger  return,  I  should  say  that  they  were  not 
a  monopoly  or  trust,  and  that  they  certainly  did  no  harm  to  the  rent- 
payer  or  to  anybody  else. 

MR.  LEUBUSCHER:  I  call  your  attention  to  the  fact  that,  in 
the  case  of  the  Astors,  one-fourth  of  the  total  valuation  is  for  the  im- 
provements, while  three-fourths  is  for  the  land.  If  you  call  the  small 
value  of  the  improvements  on  their  land  a  proper  use  of  the  land,  1 
would  say  it  was  not  put  to  the  proper  use,  but  to  the  poorest  use. 

MR.  BUTTENWIESER:  What  is  the  ratio  of  building  to  land 
value  of  other  properties  located  in  the  same  neighborhoods  as  theirs? 
Did  you  take  the  trouble  to  make  such  comparisons?  I  think  you  will 
find  they  have  been  as  fair  in  their  policy  of  improvements  as  any  one 
else.     I  am  quite  sure  that  you  will  find  that  in  most  cases  they  im- 

353 


f  ! 

•  1 


III 


I 


i 


» 


proved  their  land,  or  else  ground-rented  it  to  tenants  who  built.  While 
I  hold  no  brief  for  the  Astors  or  the  Goelets  or  these  other  large  land 
owners,  I  would  remind  you  that  if  the  Astors,  out  of  their  large  assets, 
have  seen  fit  to  invest  in  this  piece  of  land,  which,  if  they  continue  to 
hold  it  and  pay  through  all  the  years  heavy  taxes  and  large  assessments, 
may  or  may  not  show  them  a  profit,  that  is  no  reason  for  claiming  that 
their  policy  is  to  hold  land  out  of  use.  You  must  first  furnish  statistics 
as  to  all  the  Astor  holdings.  Do  you,  for  instance,  think  the  Waldorf- 
Astoria  a  proper  improvement? 

MR.  LEUBUSCHER:     It  looks  like  one  to  me. 

MR.  BUTTENWIESER:  Do  you  think  the  New  Netherlands  is 
a  proper  improvement  of  the  land? 

MR.  LEUBUSCHER:     Yes. 

MR.  BUTTENWIESER:  Do  you  consider  the  Astor  Hotel  and 
the  Astor  Building  at  Wall  Street  and  Broadway  proper  improvements? 

MR.  LEUBUSCHER:    Yes. 

^  MR.  BUTTENWIESER:  Finally,  do  you  not  consider  the  new 
building  which  one  of  the  Astors  is  now  erecting  at  the  corner  of 
Vesey  Street  and  Broadway  a  better  and  more  suitable  improvement 
than  the  Woolworth  Building,  just  one  block  above,  and  many  others 
which  you  are  seeking  to  exempt? 

MR.  LEUBUSCHER:  Which  do  I  think  the  better  improve- 
ment? TheAstor  Building  is  hardly  adequate,  while  the  Woolworth  is 
too  much  improved. 


854 


SIXTH   HEARING. 
November  24,  1915,  2:30  P.  M.,  Room  16,  City  Hall. 

R.  A.  Seligman,  presiding. 


Professor  Edwin 


TESTIMONY  OF  PROFESSOR  JOSEPH  FRENCH  JOHNSON, 
Deai^    New  York    University    School    of    Commerce,    Accounts    and 
I'mance;  Member,  Commission  on  New  Sources  of  Revenue* 
Representing  The  Merchants'  Association  of  New  York      * 

PROFESSOR  JOHNSON:  The  directors  of  The  Merchants' 
Association  have  considered  this  question  of  reducing  the  tax  on  build- 
ings, and  have  decided  adversely  with  regard  to  it,  as  the  result  of 
the  report  of  the  Committee  on  Taxation,  of  which  I  am  chairman.  That 
committee  in  its  report  held  that  the  reduction  of  the  rate  of  taxes  on 
buildings,  since  it  would  be  attended  by  an  increase  of  the  rate  upon 
land,  would  necessarily  tend  to  the  lowering  of  land  values,  and  that 
any  such  reduction  of  land  values  as  the  result  of  a  change  in  the 
system  of  taxation  would  be  unjust  and  would  be  liable  to  result  in  a 
calling  in  of  mortgages  on  account  of  the  lessening  of  land  value*^  The 
directors  of  The  Merchants'  Association  were  unanimous  in  their  vote 
that  any  law  having  for  its  purpose  the  reduction  of  the  rate  upon  build- 
ings and  the  consequent  increase  of  the  rate  upon  land  should  be 
opposed. 

PROFESSOR  SELIGMAN:  Professor  Johnson,  the  point  has 
been  made  by  several  of  the  speakers  in  preceding  sessions  that  this  fear 
of  the  calling  in  of  mortgages  has  been  very  much  exaggerated  partly 
because  of  the  fact  that  mortgage  money  is  loaned  up  to  the  extent  of 
fifty  or  even  sixty  per  cent,  of  the  value  of  the  real  estate,  and  that 
even  on  the  assumption  of  a  considerable  decrease  in  the  value  of  the 
land,  there  would  still  be  an  ample  margin  left  as  the  basis  of  the 
security.     What  do  you  think  of  that  argument? 

PROFESSOR  JOHNSON:  I  should  have  to  know  a  great  deal 
more  than  I  know  about  the  situation  in  New  York  to  be  dogmatic  on 
the  subject,  but  I  understand  that  many  parcels  of  land  have  greatly 
declined  in  value  in  the  last  ten  years  in  certain  sections  of  the  city 
and  I  can  see  very  good  reason  why  they  should  have  declined  in  value* 
The  erection  of  very  tall  buildings  in  certain  parts  of  the  city  has  given 
a  floor  space  far  beyond  the  expectations  of  twenty  years  ago,  and  then 
the  improved  rapid  transit  facilities  have  taken  people  out  of  the  city 
— out  of  the  downtown  section  of  Manhattan — so,  I  should  be  very 
much  surprised  if  I  found  I  was  mistaken  in  my  view  that  certain  par- 
cels of  land  have  declined  in  value  in  spite  of  the  increase  of  the  last  ten 
years.  Now,  any  increase  in  the  tax  rate  upon  land  is  certain  to  cause 
a  decline  in  the  value  of  the  land.  And  I  should  fear  it  would  be  disas- 
trous in  many  cases — in  the  cases  of  land  which  has  not  increased  but 
has  decreased  in  value  as  a  result  of  natural  forces,  at  work  in  the  last 
ten  or  fifteen  years. 

355 


I 


PROFESSOR  SELIGMAN:  Do  you  believe,  in  the  first  place, 
that  all  the  alleged  benefits  of  the  scheme  would  ensue ;  and,  second,  if 
they  did  ensue,  do  you  think  that  it  would  prevent  the  value  of  land 
from  falling? 

PROFESSOR  JOHNSON :  I  do  not  believe  those  benefits  would 
ensue.  I  think  they  are  visionary  in  character.  It  is  possible  that  if 
buildings  were  exempted  from  taxation  there  would  be  a  certain  amount 
of  additional  building  in  excess  of  what  would  come  on  under  present 
conditions,  for  two  or  three  years.  Then  it  is  certain  that  the  rents  of 
buildings  would  be  a  little  lower  than  they  are  now.  I  am  inclined  to 
think  that  such  an  effect  can  reasonably  be  expected,  that  is,  more 
buildings,  and  then  we  will  have  to  lower  rents.  There  would  be  a  new 
level  of  rents  arrived  at.  But,  Mr.  Chairman,  I  do  not  think  that  tlie 
new  level  of  rents  would  mean  very  much  to  the  average  man.  I  do 
not  believe  that  the  difference  of  rents  that  were  prevailing  after  the 
three-year  stimulus  or  boom,  if  I  may  call  it  that,  in  building,  that  the 
difference  between  rents  of  the  new  era  and  the  rents  to-day  would  be 
enough  to  attract  any  attention. 

There  are  so  many  forces  at  work,  of  course,  making  prices  on 
goods  and  also  rents  on  buildings,  that  I  do  not  believe  that  additional 
building  would  be  sufficient  to  bring  about  any  very  marked  reduction 
of  rents.  I  grant  that  theoretically  it  would  be.  The  tendency  would 
be  in  the  direction  of  lowering  rents.  I  doubt  if  it  would  be  in  the 
direction  though  of  better  housing,  of  better  quarters,  or  more  sanitary 
quarters. 

Those  who  have  had  any  experience  with  landlords  in  New  York 
City  and  with  builders,  know  that  the  man  who  is  putting  up  a  building 
for  rent  is  anxious  to  get  out  of  it  all  he  can.  In  fact,  he  is  compelled 
to  do  so  by  the  competition  of  other  buildings.  So  he  puts  up  a  certain 
kind  of  building  for  the  people  who  are  able  to  pay  twenty  dollars  a 
month,  a  little  different  one  for  those  who  can  pay  thirty  dollars  a 
month,  and  so  on.  I  doubt  if  the  quarters  in  which  the  people  in  Man- 
hattan live  or  in  the  City  of  New  York  live,  would  be  a  bit  better  than 
they  are  now  as  a  result  of  any  change  made  in  the  tax  rate  upon 
buildings. 

If  New  York  happened  not  to  increase  relatively  but  to  remain 
stationary  in  its  attractiveness  as  a  city,  so  that  there  would  be  no 
considerable  increase  in  the  population  and  in  the  wealth  of  the  city, 
nor  in  the  earning  capacity  of  the  people  in  the  city,  I  should  not  be 
surprised  at  all  if  the  exemption  of  buildings  from  taxation  produced  no 
appreciable  result  for  several  years  in  the  building  trades  or  upon  rents. 
Even  if  it  did,  however,  after  a  few  years,  as  I  said  before,  there  would 
be  a  new  level  of  rents  established.  A  certain  new  condition  would 
prevail  governing  the  erection  of  buildings  at  a  profit,  and  we  would  be, 
to  all  intents  and  purposes,  as  far  as  sanitation  is  concerned,  where  we 
are  now,  with  possibly  this  exception:  If  the  land  is  made  to  bear  the 
brunt  of  the  taxation  and  the  buildings  are  exempted,  unless  we  pass 
a  law  limiting  the  height  of  buildings,  I  should  expect  to  see  more 
skyscrapers,  more  tall  buildings;  I  should  expect  also  to  see  in  the  out- 
lying suburbs  smaller  gardens,  and  smaller  yards,  because  it  will  be 
those  yards  and  those  gardens  upon  which  the  small  man  will  have  to 
pay  taxes,  and  not  upon  his  home. 

356 


I  notice,  Mr.  Chairman,  that  there  has  been  some  discussion  here 
as  to  whether  the  untaxing  of  buildings  would  lessen  speculation  in 
land.    Am  I  right,  and  is  that  of  interest? 

I  do  not  think  the  change  would  have  the  slightest  effect  upon 
speculation  in  land  if  the  tax  upon  land  is  increased.  We  will  then 
have  land  valued  by  buyers  and  sellers  at  a  new  level.  But  the  same 
reason  will  exist  as  exists  now  for  buildings.  The  increasing  wealth 
and  increasing  population  of  this  city  will  increase  the  value  of  land  and 
there  would  be  the  same  inducement  to  speculate  in  real  estate  or  in 
land  that  exists  to-day. 

I  think  that  there  would  be  a  tendency  to  improve  parcels  of  land 
to  the  liniit  and  leave  certain  pieces  of  land  now  unutilized  still  unutil- 
ized. I  should  not  be  surprised  if,  by  untaxing  buildings  and  placing  a 
very  heavy  burden  upon  land,  certain  owners  of  certain  parcels  of  land 
would  feel  like  giving  them  away  rather  than  pay  taxes. 

People  come  to  New  York  to  live  for  a  number  of  reasons:  The 
chief  reason  is,  of  course,  because  in  New  York  City  there  is  a  won- 
derful opportunity  to  make  money  and  to  earn  a  living.  The  mere  fact 
that  rents  of  buildings  have  in  some  way  been  changed  by  a  system  of 
taxation  and  apparently  been  made  a  little  lower,  I  think,  would  not 
draw  more  people  to  New  York  City.  They  come  now  on  account  of 
the  great  opportunities  here,  the  social  life,  the  literary  life  and  oppor- 
tunites  for  enjoyment,  and,  above  all,  the  opportunities  to  make  money 
and  thus  we  will  bring  people  to  New  York  in  spite  of  what  the  people 
outside  of  this  city  call  very  high  rents. 

I,  personally,  if  I  had  money  to  invest,  should  not  feel  like  invest- 
ing It  in  land  in  a  city,  or  in  a  state,  in  which  after  centuries,  during 
which  a  certain  tax  system  had  existed,  that  system  had  been  changed 
to  the  detriment  of  the  owner  of  land.  If  I  were  a  trustee  or  executor 
making  investments  I  would  certainly  not  buy  land  in  a  city  or  a  com- 
munity which  showed  a  disposition  to  treat  any  class  of  property  un- 
justly or  unfairly.  How  much  that  would  affect  the  value  of  land,  of 
course,  I  don't  know,  because  I  do  not  know  how  many  other  people 
feel  about  it  as  I  do.  It  seems  to  me  that  many  must  feel  the  same  way 
as  I  do. 

PROFESSOR  SELIGMAN:  I  understand  that  you  object  to  the 
scheme  of  untaxing  buildings  chiefly  for  the  reason  that  the  alleged 
beneficial  results  are  problematical  and  that  the  alleged  deleterious  re- 
sults are  pretty  certain? 

PROFESSOR  JOHNSON :     Exactly. 

PROFESSOR  SELIGMAN :  I  would  like  to  ask  you  as  to  whether 
your  objection  to  the  scheme  would  be  in  any  way  lessened  if  the  in- 
creased burden  on  land  values  or  on  a  particular  parcel  of  land  were 
brought  into  relation  with  the  increase  in  the  value  of  land  which  might 
be  hoped  for  under  more  normal  conditions.  By  that  I  mean  not  sim- 
ply a  tax  on  the  increment  of  land  values,  but  I  mean  also  a  greater  tax 
upon  land  values  in  general  with  some  relation  to  its  possible  increase 
in  value? 

PROFESSOR  JOHNSON:  I  should  be  very  glad  to  see  some 
such  plan  worked  out,  for  I  should  most  thoroughly  approve  of  it.  Mv 
objection  to  this  plan  of  untaxing  buildings  is  that  it  is  an  arbitrary 
reduction  of  the  capital  value  of  land. 

357 


• 


I 


TESTIMONY  OF  MR.  ALLAN  DAWSON, 
Chairman,  New  York  Congestion  Committee. 

MR.  DAWSON:  I  desire  to  discuss  this  question,  particularly  in 
relation  to  the  evils  of  urban  congestion.  By  congestion,  I  do  not  mean 
a  mere  concentration  of  population,  with  geographical  diffusion,  the  only 
corrective;  but  rather  the  conditions  that  spring  from  bad  living,  light  and 
air,  and  insufficient  parks  and  playgrounds.  The  problem  is  not  how 
many  persons  are  on  an  acre,  but  how  those  on  an  acre  live. 

A  removal  of  the  tax  on  buildings,  with  a  corresponding  increase  of 
the  tax  on  land  will  lessen  the  evils  of  congestion  for  the  foUowini? 
reasons :  ** 

First.  It  will  stimulate  an  adequate  improvement  of  unused  or  partly 
used  areas;  first,  because  urban  land  is  a  complementary  form  of  wealth, 
and  to  be  fruitful,  must  be  wedded  to  proper  improvements ;  and,  second] 
because  when  choice  is  offered,  the  tendency  of  capital  is  to  flow  from 
taxed  to  untaxed  fields.  » 

Second.  It  will  better  the  quality  of  tenement  houses.  When  a  large 
number  of  new  structures  are  erected,  the  new  and  more  economic  build- 
ings tend,  according  to  familiar  Ricardian  principles,  to  drive  out  rook- 
eries previously  barely  profitable.  At  the  first  glance  it  might  seem  as 
if  relief  from  taxation  would  make  for  the  continued  use  of  poor  buildings. 
But  the  manufacture  of  new  and  better  buildings,  plus  the  influence  of  a 
heavier  tax  on  land,  would  overcome  this  tendency,  and  competition  would 
push  the  poorer  buildings  below  the  margin  of  profit. 

Third.  It  will  decrease  rents  per  unit  of  space  to  the  extent  of  the 
present  tax,  now  shifted  to  the  tenant,  and  thus  enable  a  family  that  now 
occupies  four  rooms,  to  hire,  say,  five. 

Fourth.  It  will  encourage  a  more  harmonious  economic  development 
of  the  city.  As  one  approaches  the  city's  centre,  all  things  being  equal, 
land  values  rise.  With  similar  improvements,  the  loss  through  the  inade- 
quate use  of  land  becomes  greater  with  an  increase  on  land  values.  A 
heavier  tax  on  land  and  no  tax  on  buildings  will  thus  lead  to  a  greater 
relative  building  activity  nearer  the  centre  than  on  the  periphery.  This, 
in  turn,  will  diminish  the  waste  incident  to  contructing  and  maintaining 
miles  and  miles  of  streets  and  sewers,  and  lessen  the  cost  of  educational, 
water,  lighting,  police  and  fire  services. 

The  advantages  of  harmonious  urban  development,  of  comparatively 
solid  building,  are  insufficiently  appreciated.  A  recent  census  of  a  modern, 
outside  court,  nine-story  West  Side  apartment  house,  with  sun  in  prac- 
tically every  room,  showed  250  persons  in  residence.  The  ground  space 
was  a  quarter  of  an  acre,  giving  a  density  of  1,000  per  acre,  or  640,000  per 
square  mile.  South  of  59th  Street,  Manhattan's  area  is  approximately  13 
square  miles.  At  1,000  an  acre,  nearly  9,000,000  could  live  on  it.  Allow 
half  the  ground  for  streets,  parks  and  playgrounds,  the  population  of 
New  York  could  be  housed  south  of  59th  Street  under  excellent  con- 
ditions. 

The  municipal  cost  of  our  scattered  development  is  probably  half  our 
debt  service,  and  probably  a  quarter  of  the  city's  annnual  budget.  The 
magnitude  of  our  per  capita  municipal  expenditures  is  not  without 
reason.  Other  bad  effects  are  obvious.  The  lost  motion  from  daily 
shooting  millions  many  miles  from  homes  to  business  house  or  factory, 
is  prodigious.  Measured  in  hours  taken  from  sleep  and  recreation  New- 
York's  eight-hour  day  is  a  ten-hour  day.     The  land  speculator  won- 

358 


ders  what  becomes  of  the  increment  that  so  often  he  does  not  get     It 
is  swallowed  up  by  the  Moloch  of  waste. 

If  this  waste  were  eliminated,  taking  New  York  as  a  whole,  the 
consequent  increase  in  market  land  in  the  area  of  intensive  urban  use 
would  largely  offset  the  loss  in  market  values  due  to  an  increase  of  the 
relative  burden  on  land.  Give  New  York  the  harmonious  development 
that  the  untaxing  of  buildings  would  assist  and  a  tax  of  two  per  cent, 
on  land  values,  with  little  tax  on  anything  else,  might  easily  realize  as 
large  a  sum  as  now  is  realized  from  land  and  buildings  together. 

In  conclusion,  I  would  pass  to  another  consideration.  The  doubling 
w^ithin  a  decade  of  the  price  of  building  materials  and  the  great  in- 
crease in  labor  costs  have  discouraged  building  operations  and  thub 
increased  congestion.  To  take  the  tax  from  buildings  would  be  in  the 
direction  of  restoring  things  as  they  were  when  taxes  on  land  were 
85  per  cent,  of  the  total,  whereas  now  they  are  but  75  per  cent.  Ac- 
cording to  accepted  principles,  a  lessening  of  the  relative  tax  on  land 
is  a  gift  to  land  owners  of  the  capitalized  amount  of  the  reduction.  In 
view  of  the  increase  in  building,  and  the  practice  of  assessing  new 
buildings,  according  to  cost,  we  have  at  work  an  influence  steadily 
making  for  increasing  the  burden  on  land  payers,  and  decreasing  it  on 
land  owners. 

My  opinion  that  something  should  be  done  to  re-establish  the  old 
equilibrium  is  strengthened  by  the  knowledge  that  in  1890,  when  land 
bore  relatively  a  heavier  burden  than  now,  many  eminent  and  con- 
servative New  Yorkers  put  their  signatures  on  a  declaration  which 
said:  "Real  estate  should  bear  the  main  burden  of  taxation,  because 
such  taxes  can  be  most  easily,  cheaply  and  certainly  collected,  and  be- 
cause they  bear  least  heavily  on  the  farmer  and  the  worker."  Among 
the  signatories  to  the  declaration  were  George  H.  Scott  and  George  R. 
Read,  presidents  of  the  Real  Estate  Exchange;  Spencer  Aldrich,  F.  B. 
Thurber,  Henry  A.  Hurlburt,  William  Gordon  Fellows,  G.  T.  Christian- 
son,  Smith  Ely,  Amos  R.  Eno,  Hall  J.  How,  James  McCreery,  William 
Steinway  and  John  Claflin.  The  men  that  have  survived  all  now  seem 
to  have  recanted. 

PROFESSOR  SELIGMAN :  Do  you  understand  that  any  or  all 
of  these  prominent  men  had  in  mind  the  question  which  we  are  now 
discussing? 

MR.  DAWSON:    No,  I  do  not  think  so. 

PROFESSOR  SELIGMAN :  In  other  words,  that  statement  has 
no  application  to  this  particular  problem? 

MR.  DAWSON:  I  think  it  has.  I  merely  state,  as  a  matter  of 
fact,  that  that  particular  question  was  not  before  them  at  the  time, 
but  I  think  it  is  applicable,  however. 

PROFESSOR  SELIGMAN:  The  point  there  was  the  question 
of  the  taxation  of  real  estate  versus  personal  property. 

MR.  DA\ySON:  When  that  question  arose  a  man  could  discuss 
it  on  certain  lines  of  principle  which  makes  it  necessarily  pertinent  to 
the  entire  discussion. 

I  simply  said  that  they  are  laying  down  a  certain  principle. 

359 


1 


II 


• 


PROFESSOR  SELIGMAN:  Which  has  no  application  to  this 
particular  discussion  that  we  are  taking  up  here  to-day  The  next 
point  IS  this,  Mr.  Dawson:  When  you  stated  that,  in  your  opinion,  the 
result  of  this  change  would  be  to  enable  people  who  now  live  in  four- 
room  tenements  to  live  in  five-room  tenements,  did  you  base  that  opin- 
ion upon  any  studies  that  you  have  made  as  to  the  probable  amount  of 
the  reduction  in  the  rentals  that  the  landlord  would  receive  on  his 
property? 

MR.  DAWSON:  I  made  some  studies  in  that  matter.  When  I 
said  four  or  five  I  did  not  commit  myself  to  any  particular  unit  I 
merely  spoke  of  the  strong  tendency. 

PROFESSOR  SELIGMAN :  Figures  have  been  presented  to  us  bv 
our  expert  investigator  saying  that,  in  the  most  congested  portions  oi 
our  tenement  house  district,  the  net  result  of  the  possible  decrease  in 
rentals,  if  there  were  any  decrease,  would  range  from  fifty  cents  a 
month  to  a  dollar  a  month  in  the  rentals.  Now,  my  inquiry  is,  would 
that  lowermg  of  the  rentals  by  fifty  cents  or  a  dollar  a  month  enable 
a  man  who  lives  in  a  four-room  apartment  now  to  live  in  a  five-room 
apartment? 

MR.  DAWSON:     Perhaps  four  and  a  half— four  larger  rooms. 

PROFESSOR  SELIGMAN:  What  is  the  average  rental  per 
t-oom  in  New  York  City  to-day  in  the  congested  district? 

MR.  DAWSON:     I  am  told  that  it  is  about  $4  a  month. 

PROFESSOR  SELIGMAN :  It  is  about  $4  a  month,  so  that  the 
decrease  of  from  50  cents  a  month  to  a  dollar  would  mean  as  a  maxi- 
mum that  he  would  get  from  one-eighth  to  one-quarter  of  an  additional 
room  ? 

MR.  DAWSON:  If  the  argument  is  correct,  in  that  case  he 
would  get  four  and  a  quarter  rooms. 

^^^•y^^^^"^'  ^  ^^^"^  ^*  ^^^  ^^^"  stated  very  clearly  that  our 
expert  did  not  say  that  the  maximum  reduction  in  rentals  would  be 
hfty  cents  or  a  dollar  a  month.  He  said  that  the  maximum  available 
Irom  the  direction  of  the  decrease  in  the  tax  would  be  that,  and  he 
specifically  excluded  all  the  main  forces  that  are  being  considered 
here,  namely,  the  forces  that  result  from  the  competition  of  new  build- 
ings. 

PROFESSOR  SELIGMAN:  You  called  attention  to  the  fact  that 
a  more  harmonious  building  up  of  the  city,  as  you  call  it,  would  lead 
to  a  lessening  of  municipal  expenses  in  various  ways.  The  opinion 
has  been  expressed  by  some  of  the  witnesses  here  that,  in  two 
respects  at  least,  the  expenses  would  be  increased;  first,  because  of 
the  larger  number  of  people  per  acre,  due  to  the  more  intensive  use 
ot  the  land,  the  expenses  for  police  would  be  larger.  Second,  because 
of  the  more  intensive  use  of  the  land  there  would  be  much  greater  ex- 
penditure needed  for  more  parks.  Would,  in  your  opinion,  these  ad- 
ditional expenses,  due  to  the  change,  counterbalance  the  lessening  of  ex- 
pense to  which  you  called  attention? 

MR.  DAWSON :  In  regard  to  police,  I  think  that  our  experience 
Shows  that  it  takes  more  expenditure  to  police   100,000  people  scat- 

360 


ro7ht°dlSrew"York"ciy'°"  '"''""    "  ^  Particularly  small  neigh- 

.AA  ^^  "^^A-^.  *,°  ^"^V  ^  *'''"''  tl^at  there,  of  course,  we  would  have  to 

ltiZT!u^^  •"  *^^  "*y'^  expense;  however,  to  no  degree  com- 
para  Die  to  the  saving. 

th.  ci^?!^^^^^  SELIGMAN:  You  spoke  about  the  desirability  of 
h,,nH,nl^    t".  "J'^^'k*"  ^""^  ^''°'**  ^  dtcT^ast  in  the  cost  of  houses  or 

verl^f;  I  ^^'  ''^^-  ^V^*^"*  **'^*  *''«'■«  ^°"'d  be  an  increase  in  a 
very  material  element  m  the  cost  of  the  house,  due  to  the  fact  of  the 

V,mL?r  '"  fi  '■''^f  "*?  mortgage  loans,  by  which,  for  the  most  part. 
houses  are  financed  It  has  been  claimed  that  this  additional  element 
ot  cost  must  be  set  off  against  the  element  of  decreasing  cost,  due  to  the 
absence  of  taxation.     Do  you  think  that  is  a  sound  argument? 

r^^n^r^'fP^^^^^  •'  ^  "^^  "°*  ^^'"^  t'^at  is  a  sound  argument  with 
Sf^  1  ^"^  "/"^  erections.  A  fund  of  $1,000,000  is  Available  for 
rows  th^e  «T!^±^°?i^'^  ''";'^"  ''"y^  «  ^'^e  for  $1,000,000  and  Jr- 
k  Ywl  L^K^^r*  '■"  *•'/  '°/"  f""<^-  N°^'  ^"PPO^e  the  would-be  builder 
bufldL     T  ^  the  site  for  $900,000  and  has  $100,000  left  to  put  in  his 

KZ'     Th  u  ?''T'T  ''"'''''"&  ^^  tl^^"  "^^ds  to  borrow  but 

^;T-i/  '■^'"'*4  '^  *''^*  $100,000  is  left  in  the  loan  fund  and  the 
same  building  created ;  and  normally  there  should  be  a  fall  in  interest 
raxes. 


TESTIMONY    OF   MR.   FABIAN   FRANKLIN. 
Associate  Editor,  New  York  Evening  Post. 

MR.  FRANKLIN :  The  questions  which,  I  take  it,  have  occu- 
pied a  very  large  part  of  these  hearings,  while  of  high  importance,  are 
n  my  opinion,  of  secondary  moment  in  comparison  with  the  ukder- 
lymg  question.  That  question  is,  for  what  purpose  aTe  we  asked  to 
^HH.dI  "  fu^'  l*?**  fundamental  departure  from  our  bng-s?andin? 
The  .H        /^  subject  of  taxation?    The  reasons  are  essentially  two 

Henrt  Geort'.°H*.^'''^"^"r  "^T^  "'*^'-  "^^  ^he  conviction  that 
Henry  George  s  doctrine  is  right,  and  we  ought  to  act  upon  it,  or  by 

the  feeling  that  a  certain  portion  of  the  population  ought  to  be  re- 

^h2i  u  J  '^^J''^  ^^7  ^'^  "°^  paying-in  other  words,  that  rents 
should  be  reduced  for  the  benefit  of  the  rent-payers  or  of  a  certain 
class  of  rent-payers.  Although  these  two  things  are  connecLd  they 
are  by  no  means  the  same;  and  it  is  important  to  consider  them  se^^ 
from  h;.  l^"*  convinced  that  the  backbone  of  the  movement  com^ 

ofTui Idl^/"''^  ^^°T  "^^^''  ?•?*  ^^^'^  "^  advocates  of  the  untaxing 
of  buildings  whose  advocacy  of  it  is  not  at  all  based  on  that  idea   and 

isTm^'  '^''  *°,^Tf  ^^  fir^t  the  reasons  urged  for  the  measure  simp"y 
as  a  means  of  relief  for  rent-payers.  *^ ' 

r.f  /?!  ^""^  ^t^%A^  argument  I  am  going  to  assume  that  the  removal 
^n,.tl?.  *r  ''"•''^■"8^  would  actually  result  in  a  reduction  of  rents 
tX  >  ?K  AiT  °  f-  f  u  <:ons'<le'-able  part  of  the  tax  removed.  Now  I 
h^  n  that  the  relief  thus  brought  about  is  desired  by  the  advocates  of 
the  proposal  chiefly  for  the  sake  of  two  classes  of  people,  and  not  of 
the  whole  population.  Nobody  has  come  here  and  advocated  this 
change  with  zeal  and  earnestness  on  account  of  the  rents  paid  by  busi- 

361 


!l 


I 


ness  men.  Nobody  cares  about  the  rent  of  the  Woolworth  Building. 
They  care  about  rents  on  homes;  and  this  divides  itself  into  two  parts. 
The  homes  of  the  rich  do  not  come  into  the  consideration  any  more 
than  business  buildings;  the  relief  is  wanted  for  persons  in  circum- 
stances of  moderate  comfort  and  for  the  poor. 

As  regards  the  fairly  comfortable  class — people  who  pay,  say, 
from  $300  to  $600  a  year  in  rent,  or  who  own  modest  little  homes — 
everybody  would  like  to  see  them  better  off,  of  course;  but  the  ques- 
tion is,  is  it  desirable  that  these  people  should  feel  that  they  do  not 
contribute  to  the  cost  of  government?  Is  it  desirable  that  they  should 
not  pay  a  fairly  decent  amount  towards  the  support  of  the  government? 
For  my  part  I  think  that  people  of  moderate  income  should  feel  that 
they  are  contributing  something  worth  talking  about,  and  that  they 
have  a  real  interest  in  the  question  of  whether  the  municipality  is  prop- 
erly administered  or  not. 

Let  me  make  a  little  digression  here.  The  tendency  in  our  time 
is  to  levy  all  sorts  of  special  taxes,  in  addition  to  the  existing  ones,  to 
meet  the  constantly  advancing  cost  of  government.  This  is  right.  There 
ought  to  be  an  income  tax.  There  ought  to  be  an  inheritance  tax.  The 
increase  of  governmental  expenses  is  going  to  continue  no  matter  how 
economical  the  administration  may  be,  and  this  increase  is  going  to  be 
met,  and  ought  to  be  met,  by  taxes  falling  chiefly  on  the  rich.  All  the 
more  reason  that  the  plain  man,  the  ordinary  citizen,  who  has  hitherto 
paid  his  share  for  the  support  of  the  government,  should  continue  to 
pay  a  reasonable  amount.  It  would  be  unfortunate  if  the  population 
were  to  be  divided  into  a  small  class  upon  which  every  new  burden 
of  government  was  laid,  and  a  large  class  who  felt  that  it  made  no 
difference  at  all  to  them  what  the  taxes  were.  So  far,  then,  as  regards 
the  moderately  comfortable  class,  I  see  no  justification  for  making  a 
radical  departure  in  our  whole  system  of  taxation  for  the  sake  of  re- 
lieving them  of  their  present  share  of  the  tax  burden. 

In  regard  to  that  class  of  people  who  have  none  of  the  luxuries  of 
life  and  are  barely  able  to  supply  themselves  with  the  necessaries,  the 
question  is  very  different.  If  under  our  present  system  the  sum  of 
twenty  dollars  a  year,  say,  is  added  to  the  expenses  of  such  a  family 
by  taxation,  in  the  shape  of  increased  rent,  it  is  certainly  desirable  that 
they  should  be  relieved  of  that  burden  if  practicable.  It  must  be  ad- 
mitted that  twenty  dollars  a  year  is  a  matter  of  importance  to  a  family 
of  this  class.  Yet  it  must  also  be  admitted  that  it  is  not  of  vital  im- 
portance. For  the  sake  of  bringing  about  this  relief  one  would  hesi- 
tate to  upset  the  whole  basis  of  taxation  affecting  the  vast  real  estate 
interests  of  this  city.  And  unquestionably,  if  it  should  be  decided  that 
this  relief  ought  to  be  granted,  ways  could  be  found  of  bringing  about 
that  result  without  any  such  upsetting  of  the  tax  system.  One  such 
way  occurs  to  me  at  this  moment;  I  do  not  offer  it  as  a  proposal,  but 
merely  as  an  indication  of  possibilities.  A  horizontal  deduction  of 
twenty  dollars  might  be  made  from  each  tax  bill  for  every  dwelling 
included  in  it.  This  would  be  at  least  as  certain  to  have  the  effect  of 
reducing  rents  as  would  the  proposed  exemption  of  buildings;  but  it 
would  be  manifestly  designed  as  a  measure  of  relief  for  the  rent-payer, 
limited  to  the  fixed  sum  of  twenty  dollars,  and  would  leave  the  tax 
system  essentially  unaltered.  Of  course,  the  tax  rate  would  have  to  be 
so  calculated  as  to  make  the  total  levy  equal  to  what  is  required  after 
allowing  for  the  dedrctions.    Moreover,  it  would  be  easy  to  make  the 


362 


deduction  apply  only  in  cases  of  property  of  low  value,  which  would 
effect  the  humanitarian  object  desired  with  even  less  disturbance  of 
the  present  method.  Whatever  may  be  thought  of  this  particular 
scheme,  it  is  certain  that  the  relief  desired  for  poor  tenement  house 
dwellers — a  matter  of  very  small  proportions  fiscally — can  be  attained 
without  upsetting  the  status  of  all  the  real  property  in  this  city,  the 
very  heart  of  the  economic  life  of  this  great  nation. 

So  much  for  the  direct  practical  ends  aimed  at  by  this  proposal. 
But  as  I  have  said,  the  believers  in  the  Henry  George  doctrine  have 
been  the  backbone  of  this  movement.  When  it  was  initiated  some 
half  dozen  years  ago,  a  great  deal  of  stress  was  laid  upon  the  fact  that 
it  had  no  necessary  connection  with  the  single  tax  idea  and  that  many 
of  its  supporters  were  not  single  taxers.  It  was  proposed  to  take  off 
only  half  the  tax  on  buildings,  and  it  was  pointed  out  with  great  empha- 
sis that  even  that  was  to  be  done  very  gradually.  But  those  who  ob- 
jected were  fully  convinced  that  the  proposal  to  take  off  half  was  only 
a  beginning,  sure  to  be  followed  before  long  by  a  move  to  take  off  the 
whole.  And,  although  the  original  proposal  was  not  adopted,  its  advo- 
cates have  reached  the  second  stage  already.  The  proposal  now  chiefly 
agitated  is  that  of  completely  untaxing  buildings — for  the  one  per 
cent,  of  the  tax  which  is  left  is,  of  course,  retained  merely  for  the  sake 
of  a  technicality.  This  complete  untaxing  was  in  the  wood  all  the 
time;  but  this  is  not  all  that  was  in  the  wood.  To  place  upon  the 
land  the  whole  burden  of  the  taxation  now  borne  by  land  and  buildings 
together  is  only  a  step  towards  a  larger  end — the  end  that  Henry 
George  had  in  mind  from  the  outset,  and  which  he  expected  to  get 
accomplished  by  this  very  means. 

Let  us  recall  what  Henry  George  said  on  this  subject  in  the  very 
first  edition  of  Progress  and  Poverty.  He  declared  without  qualification 
that  land  values  ought  to  be  confiscated;  but  he  said  it  was  desirable 
to  avoid  the  form  of  confiscation,  and  attain  the  substance  of  it  by  a 
tax  which  would  take  up  the  whole  value  of  the  land.  But,  he  said, 
it  is  not  necessary  expressly  to  decree  such  a  tax;  all  that  is  necessary- 
is  to  abolish  all  other  taxes  and  the  thing  will  take  care  of  itself.  With 
all  the  taxes  falling  upon  the  land  owners,  none  but  this  small  class 
of  the  population  would  be  interested  in  keeping  taxes  down ;  and  as 
there  is  no  limit  to  the  possible  needs  of  government,  taxes  would  be 
put  up  higher  and  higher  until  they  absorbed  the  entire  rental  value 
of  the  land.  There  was  profound  political  sagacity  in  this  view,  and  its 
soundness  is  even  more  evident  now  than  it  was  when  Henry  George 
wrote  his  book  thirty  odd  years  ago.  At  that  time  the  class  of  things 
which  we  now  designate  by  the  name  of  social  betterment  had  hardly 
come  into  view.  To-day  it  is  perfectly  evident  that  demands  upon  the 
government  for  purposes  of  this  nature  can  be  expanded  without  limit. 
No  doubt,  the  tendency  is  a  good  one;  but  the  question  is  whether  we 
are  going  to  accomplish  these  things  honestly,  or  throw  the  whole  bur- 
den upon  one  class,  a  class  that  has  been  guilty  of  no  crime,  but  on  the 
contrary  has  been  engaged  in  a  species  of  enterprise  that  has  been  con- 
sidered— and,  I  am  sure  justly  considered — as  legitimate  as  any  other 
form  of  business  activity. 

The  real  question,  then,  that  is  before  us  is  not  any  little  matter 
of  a  quarter  of  one  per  cent,  difference  in  mortgage  rates,  or  of  twenty 
dollars  a  year  difference  in  rents,  but  the  question  whether  the  leading 
commercial  and  financial  community  of  the  United  States  wishes  to 


I 


M 


M 


363 


be  headed  straight  toward  outright  confiscation  of  land  values.  Surely 
before  we  take  such  a  step  we  should  weigh  most  gravely  its  far-reach- 
ing consequences.  We  ought  to  feel  ourselves  the  guardians-  not  only 
of  the  billions  of  dollars  of  real  estate  in  this  city,  but  also  of  the 
economic  soundness  of  the  whole  country,  for  the  force  of  the  example 
which  New  York  sets  is  absolutely  incalculable. 

I  should  like  to  say  a  word  about  a  counter-argument  that  advo- 
cates of  measures  tending  towards  a  full-fledged  single  tax  are  in  the 
habit  of  using.  When  the  proposal  to  take  oflF  half  the  tax  on  buildings 
by  installments  extending  over  five  years  was  objected  to  on  the 
ground  that  this  would  prove  to  be  but  a  first  step,  its  advocates  de- 
clared that  the  objection  was  insincere.  If  the  move  was  bad,  they 
said,  it  would  be  shown  to  be  so  at  the  end  of  the  five-year  period, 
and  what  the  objectors  were  really  afraid  of  was  that  it  would  prove 
to  be  a  good  thing.  This  argument  rests  on  the  assumption  that  the 
question  of  whether  a  thing  is  good  or  bad  in  a  matter  of  this  kind 
is  entirely  simple.  The  truth  is  that  nothing  is  more  difficult  to  de- 
termine. Not  only  is  it  extremely  difficult  to  decide  whether  or  not 
the  community  as  a  whole  has  been  benefited,  and  whether  the  future 
results  are  likely  to  be  good  or  bad,  but  there  is  also  the  question 
whether  injustice  has  been  done  to  some  while  gains  have  been  made 
by  others.  You  cannot  decide  matters  of  this  kind  justly  by  a  count  of 
noses.  Moreover  it  may  easily  happen  that  even  if  the  feeling  is  gen- 
eral that  the  experiment  has  not  worked  well,  yet  a  very  taking  cry 
mi^ht  be  raised  that  the  trouble  was  that  we  had  not  gone  far  enough. 
This  is  a  very  familiar  phenomenon  in  another  field.  When  democratic 
institutions  have  not  worked  well,  and  people  point  to  their  failure 
in  one  respect  or  another,  the  favorite  slogan  of  thoroughgoing  be- 
lievers in  democracy  is — "The  cure  for  democracy  is  more  democracy." 
And  this  is  precisely  the  kind  of  answer  that  single  taxers  have  re- 
peatedly made  to  critics  who  have  pointed  to  the  failure  of  rosy  ex- 
pectations from  schemes  for  the  untaxing  or  partial  untaxing  of  build- 
ings. They  have  said  that  the  trouble  was  that  these  schemes  did  not 
get  rid  of  land  speculation,  which  they  regard  as  the  root  of  the  evil, 
and  should,  therefore,  not  be  counted  as  disproof  of  the  blessings  of 
the  bona  fide  single  tax  plan.  For  all  these  reasons,  it  would  be  in  the 
highest  degree  dangerous  to  undertake  an  experiment  of  the  kind  pro* 
posed.  The  matter  is  one  that  cannot  be  trifled  with.  It  must  be 
treated  on  the  basis  of  fundamental  principle,  and  not  made  the  subject 
of  light-minded  experimentation. 


STATEMENT  OF  MR.  DE  WITT  CLINTON. 

MR.  CLINTON:  In  my  opinion  our  present  system  of  raising 
revenue  is  inadequate,  unwise  and  unjust.  It  penalizes  industry  and 
legitimate  business  and  encourages  speculation  and  illegitimate  busi- 
ness. I  heartily  recommend  the  proposal  to  gradually  reduce  taxes 
on  buildings  and  shift  them  to  land  values,  as  by  so  doing  building  lots 
now  wanted  for  improvement  but  held  at  exorbitant  prices  would  be 
thrown  upon  the  market  and  industry  necessarily  fostered. 

As  land  is  one  of  the  two  indespensable  factors  in  the  production 
of  wealth,  labor  being  the  other,  it  is  evident  that  when  productive 
land  is  held  out  of  use,  labor  is  blocked  to  just  that  extent.  There- 
fore those  who  control  access  to  land  control  the  situation. 

364 


From  one-third  to  one-half  of  the  land  of  our  cities  and  towns  is 
held  either  vacant  or  greatly  underimproved  by  owners  who  are  wait- 
mg  to  realize  speculative  profits.     New  York  is  no  exception. 

Few  economists  deny  that  the  system  of  raising  revenue  from  site 
values  and  exempting  the  products  of  labor  would  stimulate  industry, 
and  applied  to  building  lots  of  a  city,  would  stimulate  building;  but 
they  raise  a  variety  of  objections  such  as  the  following,  which  I  shall 
endeavor  to  answer  briefly. 

Objection  A.  "Rents  would  not  be  reduced"  they  say.  Rents, 
as  with  any  other  commodity,  rise  when  demand  has  been  increased 
relatively  to  supply. 

Increased  demand  for  building  accommodation  is  caused  by  in- 
creased business,  and  consequently  must  be  accompanied  by  increased 
ability  to  pay  for  them,  an  ability  which  will  keep  pace  with  the  rise- 
Objection  B.  The  real  estate  business  will  be  injured.  Only  such 
part  of  it  as  consists  of  land  speculation,  and  this  should  be,  for  land 
speculation  injures  everybody  except  him  who  directly  profits  by  it. 
Objection  C.  The  city  is  now  overbuilt,  therefore,  why  should 
land  be  cheapened  to  encourage  more  building.  Overbuilding  is  one 
phase  of  the  so-called  "over-production."  Over-production  can  never 
truly  exist  so  long  as  poverty  exists,  and  needs  are  unfulfilled.  Lack 
of  purchasing  power,  or  efficient  demand,  is  at  the  bottom  of  this  over- 
production situation  and  results  from  lack  of  opportunity  to  apply  labor 
to  land  because  monopoly  can  dictate.  If  land  becomes  less  expensive 
and  buildings  are  relieved  of  taxation  burdens,  charges  for  housing  ac- 
commodations will  be  less,  occupants  will  begin  to  come  in  and  fill  the 
vacant  spaces  and  this  condition  of  "over-production"  (in  our  case 
overbuilding)   will  disappear. 

Objection  D.  The  revenue  from  land  values  may  be  insufficient 
to  meet  public  expenses,  especially  in  a  falling  market.  The  land 
values  of  a  place  reflect  its  communal  advantages.  These  land  values 
exist  because,  and  are  a  measure  of  the  conveniences  of  that  place  and 
must,  normally,  be  sufficient  to  pay  for  the  production  of  these  con- 
veniences. 

Objection  E.  It  has  been  asked  if  wages  in  New  York  City  are 
not  higher  because  ground  rents  are  higher;  that  is,  labor  dernands 
and  receives  more  because  of  these  higher  ground  rents.  This  is  like 
asking  if  I  cannot  give  two  persons  the  same  dollars.  If  wages  are 
really  higher  in  New  York  than  in  other  places  where  ground  rents 
are  lower,  how  about  that  other  fact  well  known  to  economists  that 
wages  in  new  countries,  where  land  values  are  low,  are  higher  than  in 
older  countries  where  land  values  are  high?  There  seems  to  me  a 
contradiction  here.  But  wages  are  not  higher  in  New  York  than  else- 
where for  the  same  grade  of  work  or  ability.  If  they  should  be,  they 
could  not  remain  so,  because  labor  would  flock  in  to  take  advantage  of 
them  and  the  increased  demand  caused  by  this  would  also  cause  a 
lowering  to  the  same  general  level  as  before. 

Objection  F.  Then  it  is  asked  if  increased  population  does  not 
cause  increased  prices  of  commodities  on  account  of  increased  demand, 
in  the  same  way  that  it  causes  increased  prices  for  land.  To  this  I 
answer,  No.  The  cases  are  not  analogous.  Increased  demand  for 
products  of  labor  is  always  met  by  increased  supply  of  them,  whereas 
increased  demand  for  land  cannot  be  so  met  since  the  quantity  remains 
fixed.     We  all  know  that  prices  for  the  same  grade  of  goods  are  not 


jf' 


Hit 


365 


higher  in  large  cities  than  in  small  ones,  as  a  general  proposition,  not- 
withstanding that  ground  rents  are  higher. 

As  an  architect,  I  commend  to  your  favorable  consideration  the 
proposal  to  gradually  untax  buildings  and  shift  the  taxes  upon  the  site 
values  of  lots  as  being  consistent  with  justice  and  prosperity  and  as 
necessarily  resulting  in  an  increase  in  building  activity  and,  therefore, 
in  all  other  lines. 

CLOSING  STATEMENT  OF  MR.  BENJAMIN  C.  MARSH. 

NOTE: — The  Closing  Statement  of  Mr,  Stewart  Browne  is  not 
printed  here,  because  the  substance  of  it  is  contained  in  the  brief 
submitted  by  him  and  printed  as  an  exhibit. 

MR.  MARSH :  Gentlemen,  a  solemn  obligation  rests  upon  your 
Committee,  after  the  investigation  you  have  made  and  the  hearings 
you  have  held,  to  recommend  the  gradual  transfer  of  taxes  now  levied 
on  buildings  to  land  values,  for  several  reasons  I  am  going  to  enumer- 
ate in  detail. 

We  thoroughly  appreciate  the  political  situation  here,  in  the  fact 
that  the  administration  may  not  deem  it  wise  to  attempt  to  urge  this 
question  or  this  change  in  tax  system  immediately.  It  seems  to  us 
that  the  thing  which  is  incumbent  on  this  Committee  to-day  is  to  regard 
the  situation  as  a  whole  regardless  of  any  political  aspirations  or  even 
exigencies  and  to  recommend  this  change  for  the  following  reasons: 

Your  own  investigator,  Dr.  Haig,  has  not  only  stated  in  his  report 
that  the  change  promises  ultimate  benefits  of  considerable  importance 
to  all  tenants  and  to  many  of  the  home  owners  in  the  outlying  bor- 
oughs, but  before  your  Committee  indicated  that  it  would  be  a  good 
thing.  I  feel  sure  that  Dr.  Haig  must  have  meant  that  rents  would  be 
reduced.  I  will  quote  now  from  his  testimony  before  this  (Committee. 
Mr.  Leubuscher  asked  the  question: 

"But  on  the  whole,  you  think  the  tendency  of  this  scheme  is  in 
the  right  direction? 

"DR.  HAIG:    I  do." 

It  is  not  fair  for  the  impression  to  go  out,  which  was  gained  from 
some  of  the  things  Dr.  Haig  has  said,  that  rents  will  be  reduced  only 
by  the  amount  by  which  the  tax  on  any  particular  improvement  will 
be  reduced.  The  amount  by  which  the  rents  will  be  reduced  will  not  de- 
pend upon  the  total  decrease  or  increase  of  taxes  on  any  particular- 
property.  It  will  depend  upon  the  number  of  "To  Let"  signs  in  the 
neighborhood  competing  for  tenants.  Take  a  tenement  house  where 
they  have  to  pay  $5  for  a  small  dark  room  and  you  have  to  have  arti- 
ficial light  in  addition  during  the  day  time,  the  rate  on  this  house  may 
be  increased,  and  this  would  be  true  of  some  of  the  worst  tenements 
even  where  the  land  is  assessed  at  $20,000  and  the  building  at  $2,000. 
When  Astor  has  to  compete  with  better  tenements  his  rents  will  come 
down.  That  fact  ought  to  be  emphasized.  According  to  Dr.  Haig's 
statement  if  taxes  were  reduced  $100  on  a  given  improvement,  the  rent 
of  each  of  ten  tenants  could  be  reduced  $10  and  still  leave  the  landlord 
some  profit.  I  don't  think  that  has  anything  to  do  with  the  question 
whether  rents,  as  a  whole,  would  be  reduced  or  not. 

I  am  glad  that  the  Chairman  admits  that  rents  will  be  reduced.  I 
have  the  report  here  of  the  Mayor's  Committee  on  Congestion. 

366 


"MR.  MARSH :  Would  not  the  reducing  of  the  tax  rate  more 
than  one-half  of  the  ordinary  tax  rate  tend  to  reduce  congestion? 

"PROFESSOR  SELIGMAN:  It  would  have  that  tendency. 
A  tax  upon  anythmg  produced  tends  to  check  the  production  of 
that  thing.  The  remission  of  the  taxes  tends  to  encourage  the 
production.  A  house  is  produced  for  what  you  can  get  out  of  it, 
and  if  you  make  it  worth  while  for  people  to  put  money  into  houses] 
of  course,  they  will  do  so." 

I  think  the  majority  of  the  Committee  will  agree  that  the  striking 
thmg,  Mr.  Chairman,  is  this:  I  have  heard  practically  every  witness 
and  there  has  not  been  a  witness  who  appeared  before  you,  who,  upon 
cross  examination,  has  not  admitted  that  rents  would  be  reduced  by 
transferring  taxes  from  buildings  to  land  values.  They  made  the  most 
astounding  claims  regarding  the  stringency  of  the  money  market,  etc., 
and  in  the  same  breath  showed  their  common  sense  by  admitting  that 
rents  would  be  reduced. 

I  should  want  to  die  were  I  as  afraid  of  the  ordinary  man  as  Mr. 
Franklin,  who  bitterly  opposes  submitting  this  question  to  a  referen- 
dum here.  This  is  not  a  question  for  your  Committee  to  decide.  It 
is  a  question  to  go  to  the  whole  people.  It  is  the  one  big  political 
issue  in  New  York  City  to-day  and  from  now  on.  We  must  oust  the 
traction  interests  which  control  the  gentlemen  who  call  themselves  the 
Board  of  Estimate.  But  we  will  never  oust  them  until  we  take  the 
ground  rent  of  the  city  for  the  cost  of  government. 

Now,  let  me  quote  from  Mr.  Kelsey's  testimony  before  this  Com- 
mittee the  other  day.  He  was  asked  as  to  the  result  of  untaxing  build- 
ings, and  he  said — "I  am  sure  it  would  induce  men  to  build.  It  would 
force  them  to  build  houses  though  not  needed."  "Then,  of  course, 
rents  are  coming  down." 

Mr.  Bright,  and  every  other  man  knows  when  he  said  that  you 
could  not  get  a  loan,  that  this  is  perfect  nonsense.  Mr.  Bright  ad- 
mitted it  in  his  testimony. 

I  think  every  real  estate  man  in  New  York  City  to-day,  whether 
his  property  is  improved  or  unimproved,  wishes  that  we  had  paid  as 
we  went  along,  instead  of  piling  up  a  gross  debt  of  about  $  1,300,000,00a 
They  would  rather  have  had  a  tax  rate  on  land  of  $3  twenty  years  ago, 
than  to  be  in  the  present  condition  to-day  with  an  interest  charge  of 
$52,000,000  on  the  city's  debt.  Now,  the  city  is  facing  a  worse  situation. 
It  faces  a  crisis,  as  every  informed  person  knows,  with  the  vast  debt  we 
have.  The  interest  on  our  city's  debt  amounts  to  about  the  total  budget 
of  Chicago. 

There  is  a  moral  question  involved  as  well  as  an  economic  question, 
which  we  cannot  ignore  entirely.  Either  the  people  of  New  York  City 
are  a  bunch  of  rascals  and  thieves,  or  else  we  have  a  very  bad  system 
^  here.  Our  opponents  say  if  we  start  to  untax  buildings  we  will  want 
to  go  further.  There  has  been  no  argument  before  you  which  reduced 
to  a  logical  conclusion  does  not  admit  that  this  will  be  a  good  thing, 
or  else  that  the  people  want  to  steal.  Now,  I  am  not  a  single  taxer.  I 
have  called  attention  to  that  before.  I  believe  that  there  should  be  a 
rapidly  progressive  income  tax  for  the  Federal  Government.  We  have 
our  own  situation  here  to  face.  Under  present  conditions  I  believe  the 
tax  rate  by  1920  will  be  2.40  with  the  present  sources  of  revenue  and 
the  addition  of  the  state  direct  tax.     It  has  been  proven  to  you  beyond 

367 


I 


any  unbiased  doubt  that  the  change  we  advocate  would  permanently 
reduce  rents  and  taxes  on  small  homes  by  reducing  the  fixed  charges 
on  all  adequate  improvements.  It  has  been  demonstrated  that  the 
change  would  permanently  encourage  industry  and  increase  employ- 
ment, by  compelling  better  and  earlier  use  of  land. 

Of  course,  the  change  will  not  bring  in  the  millennium.  No  single 
thing  will,  but  there  cannot  h>e  any  permanent  improvement  of  the  con- 
dition of  the  masses  without  it.  I  have  submitted  to  you  figures  show- 
ing marked  land  monopoly.  A  few  thousand  families  out  of  about 
1,100,000  own  the  major  part  of  the  value  of  land  in  the  City  of  New 
York  to-day. 

Mr.  Richard  M.  Hurd,  President  of  the  Lawyers'  Mortgage  Com- 
pany, one  of  the  largest  loaning  concerns  in  the  city,  has  shown  you 
that  the  change  can  be  made  in  not  more  than  ten  years,  without  in 
any  way  injuring  the  mortgage  market;  and  no  one  has  disproven  this 
self-evident  fact. 

You  know  the  inhuman  housing  conditions  of  the  city  would  be  re- 
lieved by  the  change.  You  know  that  nothing  has  been  done  practically 
to  relieve  them,  that  only  about  one-fourth  of  the  city's  population  is 
living  in  so-called  new  law  tenements,  and  they  are  paying  very  high 
rents  for  them. 

It  has  been  made  clear  that  the  change  would  encourage  logical 
and  economical  development  of  the  city,  with  a  premium  upon  light 
and  well  ventilated  buildings,  in  place  of  the  present  straggling,  illogi- 
cal and  expensive  development,  and  greater  economy  for  private  initia- 
tive as  well  as  for  the  city. 

Now,  I  am  sure  that  Mr.  Dawson  did  not  mean  that  he  urged  that 
the  population  could  be  housed  below  Fifty-ninth  Street.  Personally 
I  am  very  much  in  favor  of  the  zoning  or  districting  of  the  city. 

You  are  urged  to  postpone  this  change  of  taxes  on  account  of 
the  present  financial  depression.  This  change  is  going  to  take  ten 
years — at  least  from  five  to  ten  years,  while  the  zoning  of  the  city  -voiild 
be  done  at  one  time.  The  zoning  system  of  the  City  Plan  Committee 
is  quite  wholly  dependent  upon  present  selling  prices  of  land.  The 
change  in  the  tax  system  which  we  advocate  should  precede  the  zon- 
ing of  the  city  to  prevent  such  rapid  increase  in  selling  values  of  land 
as  will  follow  the  completion  of  projected  transit  lines  even  if  the 
city  were  zoned.  There  is  no  sense  in  having  five  or  six-story  building* 
in   the  country — in   Queens. 

Two  men,  Messrs.  Kelsey  and  Bloch,  have  claimed  that  the  "loan- 
ing trust"  of  the  city  will  control  loans  were  this  change  in  the  tax 
system  made,  and  rents  lowered.  Their  statement  regarding  this  trust 
has  been  referred  to  the  District  Attorney  for  investigation  and  action, 
but  your  Committee  should  sift  this  charge. 

We  have  shown  you  that  the  change  would  merely  compel  those 
who  are  the  financial  beneficiaries  of  municipal  expenditures  to  pay 
a  little  more  of  the  cost  of  government,  and  relieve  those  who  are  now 
taxed  twice  for  this  purpose,  first,  in  paying  ground  rent,  and  second, 
by  taxation. 

Now,  it  has  been  said  that  these  public  improvements  do  not  im- 
prove the  value  of  the  land.  You  know  how  the  hungry  hordes  of  land 
owners  clamor  for  public  improvements  from  the  Board  of  Estimate 
because  they  know  they  will  raise  the  selling  price  of  the  land  and  they 
can  unload  it  on  the  people  and  reap  unearned  fortunes. 

368 


It  is  suggested  that  you  do  not  want  to  start  this  system  until 
there  is  a  rise  in  the  prices  of  land.  New  York  land  is  pretty  weU 
down  at  par  with  the  water  squeezed  out  of  the  selling  price.  There 
is  no  better  time  than  now  to  begin  the  change.  We  have  lost  in  the 
neighborhood  of  200,000  population,  approximately,  recently,  and  there 
IS  going  to  be  an  increase  of  population  in  the  future,  and  there  is  no 
use  postponing  the  starting  of  the  proposed  change. 

By  recommending  this  change,  you  can  disprove  the  charge  that 
your  Committee  is  acting  merely  in  the  financial  interest  of  a  majority 
of  Its  members.  We  sincerely  hope  that  you  will  rise  above  the  selfish 
interests  of  a  majority  of  your  Committee,  but  the  evidence  brought 
before  you  will  convince  the  voters  of  the  city  of  me  merits  of  the  pro- 
posed change,  and  that  is  the  essential  point. 

I  want  to  take  up  a  few  of  the  alleged  objections.  Someone  asked 
the  question  why  people  come  here  and  the  answer  was,  "To  make 
rnore  money."  What  would  New  York  City  be  if  God  had  not  put  the 
Atlantic  Ocean  alongside  of  New  York  City? 

If  the  manufacturers  and  other  employers  of  labor  in  New  York 
City  were  obliged  to  pay  a  living  decent  wage,  a  large  proportion 
would  go  out  of  business  to-morrow,  and  the  Factory  Investigating 
Commission  will  confirm  that  statement,  if  they  were  obliged  to  pay 
the  very  minimum  wage  in  which  a  family  can  maintain  a  proper  stand- 
ard of  living. 

I  will  quote  from  former  President  of  The  Bronx  Miller's  report 
on  municipal  markets.  Mr.  Bennet  who  was  in  Mr.  Miller's  office  made 
the  statement  that  the  land  owner  gets  the  produce  dealer's  profit. 

"If  then  a  retail  business  proved  successful  the  owners  of  the 
property  help  themselves  by  increasing  the  rents  as  soon  as  the 
lease  permits  and  to  as  large  an  extent  as  prudence  allows." 

Now,  when  does  this  affect  general  rents?  I  will  quote  further 
from  Mr.  Miller's  report: 

"The  success  of  this  one  business  to  some  extent  establishes 
the  business  value  of  the  immediate  locality  and  the  adjoining 
rents  rise  rapidly  also." 

Now,  who  gets  the  benefit?     The  land  owners. 

I  do  not  know  of  anyone  who  has  appeared  before  you  who  wants 
to  see  the  selling  price  of  land  in  New  York  City  in  1925  or  1926  one 
dollar  less  than  it  is  to-day  through  the  transfer  of  taxes  from  buildings 
to  land  values ;  less  than  the  present  selling  price  ten  years  after  this 
measure  goes  into  operation  or  becomes  a  law. 

Here  is  a  fact  which  Mr.  Ingersoll  brought  out  and  which  I  want  to 
have  emphasized.  Even  if,  as  it  is  claimed,  one  land  speculator  loses 
what  another  makes,  the  increase  in  the  speculative  selling  price  of 
land  is  a  net  loss  and  dead  weight  upon  the  producers  of  the  entire 
community.  Suppose  the  selling  price  of  lands  should  increase  a  billion 
dollars  in  the  next  decade?  It  is  not  going  to  be  of  help  to  a  single 
producer  in  New  York  City.  Now,  that  increase  of  the  selling  price 
IS  a  dead  weight  and  a  loss.  It  may  not  benefit  anyone.  If  one  specu- 
lator loses  and  another  gains,  it  does  not  benefit  the  community  in  the 
slightest  degree.    But  someone  is  obliged  to  pay  for  it. 

I  am  glad,  Mr.  Chairman,  that  Mr.  Stabler  told  you  the  fact  about 
the    land    monopoly    in    New    York    City.      He    said    this    is    an    attack 

369 


f 


I 


upon  the  biggest  vested  interest.  Therefore,  he  objects  to  it.  He  ob- 
jects to  it  because  it  is  an  attack  upon  the  biggest  vested  interest.  1 
hope  that  this  Committee  does  not  conceive  its  duty  to  be  to  defend 
the  greatest  vested  interest,  as  admitted  by  the  beneficiaries  themselves. 

Every  man  who  has  raised  the  point  of  the  constitutional  limit  on 
the  tax  rate  has  removed  it  under  cross-examination.  We  will  put  up 
an  enormous  number  of  buildings.  We  have  also  pointed  out  that  the 
constitutional  provision  regarding  the  debt  limit  will  not  be  aflFected 
by  the  change. 

Privilege  cannot  be  logical  because  privilege  itself  is  illogical. 
Every  time  a  beneficiary  came  before  you  absolutely  thinking  that  God 
Almighty  intended  to  have  a  few  good  people  own  the  property  and  to 
look  after  the  interest  of  those  who  did  not  own  any,  he  could  not  de- 
fend his  position.  It  is  fundamentally  an  ethical  question  and  we  have 
not  made  a  claim  that  has  not  been  upheld  by  the  opponents  under 
cross-examination.  Of  course,  they  did  not  admit  it  frankly.  They  did 
not  come  here  for  that,  but  they  had  to  do  it. 

Now,  take  the  case  of  the  little  home  owner.  It  has  been  asserted 
that  a  higher  tax  on  land  will  wipe  him  out.  I  grant  you  that  the  sell- 
ing price  of  land  will  increase  less  rapidly,  but  suppose,  instead  of  in- 
ceasing  $1,000  it  increases  only  $600.  The  average  little  home  owner 
will  only  save  about  $50  a  year  in  taxes  and  20  times  $50  makes  $1,000, 
which  is  decidedly  more  exclusive  of  interest  thereon  than  the  smaller 
increase  in  the  selling  price  of  his  lot. 

Now,  I  am  going  to  ask  this  in  conclusion.  If  the  taxes  on  land 
can  be  shifted  to  the  tenant  the  same  as  the  taxes  on  the  building,  why 
the  objection  to  the  proposed  change?  That  question  when  answered 
by  the  real  estate  people  shows  the  basis  for  their  opposition  to  this 
proposition. 


370 


APPENDIX. 

Correspondence  Between  Dr.  Delos  F.  Wilcox  and  Mr.  Richard  M.  Hurd. 

Park  Row  Building. 

New  York,  N.  Y. 

\/r     r>-  L     J  n^r    rx      .  November  lo,  1915. 

Mr.  Richard  M.  Hurd, 

59  Liberty  Street, 
New  York  City. 
My  Dear  Mr.  Hurd: 

In  your  statement  before  the  Mayor's  Committee  on  Taxation, 
Monday  afternoon,  you  said,  as  I  recollect,  that  the  effect  of  the  un- 
taxmg  of  buildmgs  in  the  reduction  of  rents  would  be  brought  about 
entirely  by  the  competition  of  new  building^s.  I  tried  to  bring  out 
^^J^u  ^"^^^^^"s  ^  ^sked  what  I  think  is  the  fundamental  fallacy  in 
which  both  the  orthodox  opponents  and  the  orthodox  advocates  of 
the  untaxing  of  buildings  agree.  They  maintain  that  the  transfer  of 
the  tax  from  the  building  values  to  the  land  values  would  have  a 
direct  tendency  to  decrease  rents  and  a  direct  tendencv  to  decrea-^e  the 
selling  value  of  real  estate.  This,  I  believe,  to  be  fallacious.  I  can- 
not see  how  the  total  amount  of  the  tax  on  a  parcel  of  real  estate  or 
any  particular  distribution  of  that  tax  as  between  the  building  value 
and  the  land  value  can  have  any  direct  effect  whatever  upon  rents,  and 
I  cannot  see  how  the  distribution  of  the  tax  as  between  the  land  value 
and  the  building  value,  provided  the  total  amount  of  the  tax  on  the 
given  parcel  of  real  estate  remains  the  same,  can  have  any  direct  effect 
one  way  or  another  upon  the  value  of  the  land.  Conversely,  it  seems 
clear  to  me  that  the  reduction  of  the  total  amount  of  the  tax  levied 
upon  a  parcel  of  real  estate  will  have  the  direct  effect  of  increasing 
the  selling  value  of  the  land  even  though  the  amount  of  the  tax  levied 
against  the  land  value  itself  on  the  tax  roll  is  increased.  This  is  on  the 
assumption  that  the  selling  value  of  the  building  as  such  is  not  directly 
affected  one  way  or  the  other  by  the  increase  or  the  decrease  of  the 
taxes  or  other  operating  expenses  of  the  building  so  far  as  such  taxes 
or  operating  expenses  are  a  normal  and  necessary  part  of  the  cost  of 
the  operation  of  all  buildings  of  the  same  character,  as  the  selling 
value  of  a  building  is  determined  by  its  construction  cost.  The  neces- 
sary general  increase  or  decrease  in  the  operating  expenses  of  the 
building  will  have  the  effect  of  decreasing  or  increasing  the  selling 
price  of  the  land,  for  the  building  is  a  mere  development  of  the  land  and 
the  value  of  the  land  is  based  on  the  net  amount  of  the  earning  power 
of  the  plot  when  it  is  appropriately  improved  and  economically  admin- 
istered. If  this  is  so,  then  the  immediate  and  direct  effect  of  removing 
the  tax  from  buildings  and  increasing  the  tax  rate  on  land  value  will 
be  to  depress  the  selling  value  of  vacant  land  and  to  increase  the  sell- 
ing value  of  improved  land  where  the  total  amount  of  the  tax  levied 
against  the  land  and  the  improvements  thereon  is  decreased.  There- 
after,  if  a  parcel  of  vacant  land  that  has  been  "held  out  of  use"  is 

371 


i 


i 


improved  it  will  recover  value  that  it  lost.  If  the  improvement  is  of 
such  value  in  relation  to  the  value  of  the  land  itself  that  the  tax  on  the 
land  at  the  increased  rate  amounts  to  less  than  the  tax  on  the  land  and 
the  improvement  would  have  amounted  to  under  the  previous  rate, 
then  the  land  when  improved  will  be  more  valuable  than  it  was  before 
the  tax  rate  on  land  was  increased.  In  all  this  I  am  speaking  only  of 
immediate  and  direct  effects. 

If  this  is  right  then  the  untaxing  of  buildings  so-called  would 
not  directly  diminish  rents,  for  the  people  in  any  case  pay  all  that  they 
may  be  made  to  pay  for  the  privilege  of  living  or  doing  business  at  a 
particular  spot.  The  transfer  of  the  tax  from  buildings  to  land  would 
not  directly  affect  one  way  or  the  other  the  aggregate  selling  value  of 
real  estate.  Otherwise,  we  reach  an  absurd  conclusion,  namely — that 
the  transfer  of  all  taxes  from  land  value  to  buildings  would  increase 
the  total  selling  value  of  real  estate  by  the  amount  of  the  tax  capitalized. 

It  seems  to  me  that  this  line  of  reasoning  is  the  necessary  support 
for  your  statement  that  the  effect  of  the  untaxing  of  improvements 
upon  rents  would  be  not  a  direct  effect  but  an  indirect  one  brought 
about  by  the  competition  of  additional  buildings. 

As  this  point  seems  to  be  one  of  fundamental  importance  in  the 
consideration  of  the  questions  now  at  issue  before  the  Committee  on 
I'axation,  I  should  be  greatly  pleased  to  have  your  comments  upon 
this  line  of  reasoning.  Your  testimony  greatly  impressed  the  Com- 
mittee, and  I  am  sure  that  all  the  members  would  be  glad  to  have 
your  mature  views  upon  the  matter  which  I  now  submit  to  you. 

Yours  very  truly, 

(Signed)    DELOS  F.  WILCOX. 


Lawyers'  Mortgage  Company, 
59   Liberty  (.Street. 

New  York,  November  12th,  191 5. 
Delos  F.  Wilcox,  Esq., 
Park  Row  Building, 

New  York  City. 
Dear  Mr.  Wilcox: 

I  have  your  letter  of  November  loth  regarding  the  matter  of  un- 
taxing buildings. 

I  cannot  see  that  the  untaxing  of  buildings  would  cause  any  re- 
duction of  rents  except  where  there  is  competition  of  new  buildings. 
It  seems  to  me  that  the  lower  tax  rate  on  buildings  would  serve  as  some- 
what of  an  encouragement  to  builders  to  erect  new  buildings,  and 
would  be  only  one  of  many  factors,  the  more  important  one  being  the 
judgment  of  the  builder  as  to  whether  the  new  building  could  be  fi- 
nanced, rented  and  sold.  Where  the  land  and  building  value  are  the 
same,  I  do  not  see  that  untaxing  of  the  building,  provided  the  total 
amount  of  the  tax  remained  the  same,  would  have  any  effect  on  the 
selling  price  of  the  property  as  long  as  the  existing  building  remained*. 
When  the  time  came,  however,  to  tear  down  the  building  a  higher  tax 
on  the  land  might  cause  a  lower  selling  price  for  the  land,  or,  what 
would  be  more  likely,  it  might  check  the  steady  normal  advance  in 
land  values.    I  agree  with  you  that  permanent  buildings  are  inseparable 

372 


from  the  land  while  they  exist  and  that  the  ordinary  owner  and  pur- 
chaser of  real  estate  will  not  distinguish  in  his  mind  as  between  what 
part  of  the  tax  on  the  property  is  levied  against  the  land  and  what 
part  against  the  building.  You  brought  up  at  the  hearing  the  theoreti- 
cal case  of  having  all  the  tax  put  against  the  building,  under  which 
conditions  it  might  be  figured  that  the  land  values  would  increase  by 
the  capitalization  of  the  tax  remitted.  This  is  practically  the  situation 
in  England  where  the  income  of  land  is  taxed  and  not  land  itself.  I 
think  the  reason  that  the  land  value  is  not  increased  in  a  case  of  this 
kind  is  that  no  income  can  be  obtained  from  it  except  under  the  con- 
dition that  from  the  income  is  deducted  the  tax  on  the  building.  Here 
again,  it  makes  no  difference  whether  it  is  called  a  tax  on  the  land  or 
a  tax  on  the  building  separately.  I  agree  with  you  that  the  general 
effect  of  removing  the  tax  from  buildings  and  increasing  the  tax  on 
land  would  be  to  lower  the  selling  value  of  vacant  land,  which  would 
be  another  encouragement  to  building  in  addition  to  the  smaller  tax 
collected  against  the  building  itself. 

I  am  not  sure  that  I  agree  with  you  in  your  statement  that  the 
transfer  of  the  tax  from  buildings  to  land  would  not  directly  affect  the 
aggregate  selling  value  of  real  estate.  I  do  not  see  where  the  probable 
drop  in  land  values  would  be  compensated,  nor  do  I  think  that  we 
should  adopt  the  opposite  conclusion,  that  the  transfer  of  taxes  from 
land  to  buildings  would  increase  the  selling  value  of  real  estate  by  the 
amount  of  the  tax  capitalized,  for  the  reason  given,  viz.,  that  the  land 
will  not  remain  free  from  tax  as  soon  as  a  building  is  erected  on  it 
and  this  tax  charged  nominally  against  the  building,  but  which  also 
necessarily  includes  the  tax  on  the  location,  or  land  value,  is  discounted 
in  the  selling  price  of  the  vacant  land. 

To  repeat  what  I  said  before  the  Committee,  I  think  the  psychologi- 
cal or  sentimental  effect  of  any  change  that  appears  radical  is  usually 
bad  for  a  time,  but  I  think  that,  if  the  rate  of  taxation  should  be 
lightened  on  buildings  and  stiffened  against  land  with  a  view  to  ab- 
sorbing a  greater  part,  perhaps,  of  the  unearned  increment,  and  if  this 
were  combined  with  a  carefully  worked  out  plan  for  the  limitation  of 
height  of  buildings,  the  determination  of  zones  and  a  thorough  town 
planning  viewed  more  from  an  economic  than  an  artistic  standpoint,  the 
result  to  the  city  in  the  course  of  ten  or  twenty  years  would  be  most 
important. 

Faithfully  yours, 

(Signed)    R.  M.  HURD. 


Park   Row   Building, 

New  York,  N.  Y.,  November  22,  191 5. 
Mr.  Richard  M.  Hurd, 

Pres.  Lawyers*  Mortgage  Co., 

59  Liberty  Street,  New  York  City. 

Dear  Mr.  Hurd: 

I  received  your  interesting  letter  of  the  12th  instant  replying  to 
mine  of  the  loth  instant  in  regard  to  the  matter  of  untaxing  buildings. 

There  is  one  point  which  I  think  requires  a  little  further  elucidation. 
I  have  not  been  altogether  fortunate  in  making  all  of  my  thoughts  clear 
to  Prof.  Seligman  and  other  members  of  the  Committee  and,  perhaps,  I 

378 


I 

I 


) 


did  not  bring  out  this  particular  point  with  sufficient  clearness  in  my 
former  letter  to  you.  In  your  letter  you  say:  "I  am  not  sure  that  I 
agree  with  you  in  your  statement  that  the  transfer  of  the  tax  from 
buildings  to  land  would  not  directly  affect  the  aggregate  selling  value 
of  real  estate.  I  do  not  see  where  the  probable  drop  in  land  values 
would  be  compensated." 

My  point  is  this,  the  transfer  of  the  tax  from  buildings  to  land  will 
not  have  any  direct  effect  upon  the  aggregate  burdens  borne  by  the  land 
within  the  taxing  district.  It  will  readjust  these  burdens  among  the  indi- 
vidual parcels  of  real  estate.  In  every  instance  a  heavier  burden  will 
be  placed  initially  upon  unimproved  parcels  and  also  upon  improved  par- 
cels vi^here  the  ratio  of  the  value  of  the  improvement  to  the  value  of  the 
land  is  less  than  the  ratio  of  the  aggregate  value  of  all  the  improve- 
ments to  the  aggregate  value  of  all  the  land  within  the  taxing  district. 
On  the  other  hand,  it  seems  to  me  clear  that  the  direct  initial  eflfect 
would  be  to  decrease  the  burden  upon  all  parcels  of  real  estate  where  the 
ratio  of  the  value  of  the  improvement  to  the  value  of  the  land  is 
greater  than  the  ratio  of  the  aggregate  value  of  all  improvements  to  the 
aggregate  value  of  all  the  land  within  the  taxing  district.  If  the  bur- 
den is  less  on  these  parcels,  then  it  seems  to  me  that  the  direct  effect  must 
be  to  increase  the  capital  or  selling  value  of  the  property,  which  means, 
of  course,  that  the  decreased  total  burden  upon  land  and  building  will 
be  reflected  in  an  increased  capital  value  of  the  land. 

If  this  is  so  then  the  direct  initial  effect  of  the  transfer  of  all  taxes 
from  buildings  to  land  would  be  merely  to  redistribute  the  capital  or 
selling  value  of  real  estate  and  not  either  to  increase  or  to  diminish  this 
value  in  the  aggregate. 

Of  course,  I  see  that  the  readjustment  of  burdens  as  between  im- 
proved and  unimproved  property  will  set  in  motion  other  forces  which 
will  tend  to  supplement,  check  or  counterbalance  the  direct  initial  effects 
referred  to.  If  this  is  so,  it  seems  probable  that  the  result  would  be  to 
encourage  the  improvement  of  vacant  land  which  is  ripe  for  improve- 
ment in  comparison  with  other  lands  already  improved.  Then  until  this 
tendency  is  in  its  turn  checked  there  will  be  an  increase  in  the  number 
and  quality  of  buildings  which,  through  competition,  will  tend  to  lower 
rents,  until  this  tendency  in  turn  is  checked  by  the  incoming  of  additional 
population  attracted  by  the  lower  rents. 

It  is  not  easy  to  forecast  the  net  ultimate  effects  of  the  proposed 
change  in  the  taxing  system.  I  think  that  there  would  be  a  tendency 
through  the  indirect  forces  set  in  motion  toward  a  reduction  in  the  aqr^rre- 
gate  capitalized  or  selling  value  of  land.  I  think  that  this  would  be 
brought  about  through  the  partial  elimination  of  speculative  values. 
It  seems  to  me  that  the  actual  aggregate  value  of  all  of  the  land  within 
the  taxing  district  is  no  more  than  the  capitalized  value  of  the  aggre- 
gate net  ground  rentals  actually  paid  for  the  use  of  the  land  at  any  given 
time.  This  means  that,  eliminating  speculative  value  entirely,  the  ag- 
gregate value  of  all  land  within  the  taxing  district  is  equal  to  the  ag- 
gregate value  of  the  improved  land  and  no  more.  This  is  almost  a 
truism.  Unused  land  has  no  use  value.  Used  land  may  have  an  ab- 
normal use  value  because  of  the  effect  of  the  unused  land  which  is  held 
out  of  competition  with  it  for  speculative  purposes.  If,  therefore,  the 
untaxing  of  buildings  tended  to  bring  additional  land  into  use  it  would 
tend  to  release  normal  competitive  forces  and  reduce  the  aggregate 
value  of  lands  already  improved  by  the  value  of  the  additional   land 

374 


brought  into  use.  To  make  this  perfectly  clear  let  us  assume  that  in  a 
city  with  an  area  of  300  square  miles  150  square  miles  of  land  arc 
improved  and  150  square  miles  unimproved.  If  the  transfer  of  taxes 
from  improvements  to  land  results  in  the  improvement  of  an  additional 
50  square  miles  then,  according  to  my  reasoning,  the  200  square  miles 
of  improved  land  would  have  only  the  same  use  value  and,  barring  the 
speculative  element,  would  have  only  the  same  value  as  the  150  square 
miles  had  before  the  change  in  the  taxing  system.  Of  course,  this  as- 
sumes a  stationary  population  and  no  increase  in  the  total  amount  of 
ground  rentals  paid. 

It  has  been  stated  by  some  of  the  witnesses  before  the  Committee 
that  the  transfer  of  taxes  from  buildings  to  land  would  result  in  a 
shrinkage  of  value  sufficient  to  wipe  out  the  equities  of  a  great  num- 
ber of  small  holders  of  real  estate.  Mr.  Browne  estimates  that  there 
are  about  two  hundred  thousand  owners  of  real  estate  in  the  city. 
Another  witness  was  of  the  opinion  that  the  proposed  changes  in  the  tax 
system  would  eliminate  about  90%  of  all  these  property  owners  through 
the  scaling  down  of  values  and  the  wiping  out  of  equities.  This  claim, 
if  sound,  is  a  matter  of  major  importance.  On  the  other  hand,  if  my 
reasoning  as  above  outlined  is  correct,  then  the  value  of  all  those  par- 
cels of  real  estate,  including  the  modest  home  of  the  "small  man," 
where  the  value  of  the  building  is  greater  in  proportion  to  the  value 
of  the  land  than  the  aggregate  value  of  all  buildings  is  to  the  aggregate 
value  of  all  land,  will  not  only  be  scaled  down  in  selling  value,  but  will 
be  scaled  up  because  of  the  decreased  burdens  they  have  to  bear.  This 
again  only  relates  to  the  direct  initial  effect.      , 

I  trust  that  you  will  not  be  bored  by  my  persistence  in  this  matter, 
but  these  considerations  seem  to  be  of  such  fundamental  importance  in 
dealing  with  this  tax  problem  that  I  take  the  liberty  to  solicit  your 
further  comment  upon  the  subject  matter  of  this  letter. 

Very  sincerely  yours, 

(Signed)    DELOS  F.  WILCOX 


Lawyers'  Mortgage  Company, 
59  Liberty  Street. 

New  York,  November  29th,  191 5. 
Delos  F.  Wilcox,  Esq., 
Park  Row  Building, 

New  York  City. 
Dear  Mr.  Wilcox: 

I  have  read  with  great  interest  your  letter  of  November  22nd  and 
your  reasoning  certainly  seems  to  me  to  be  sound. 

One  difficulty  in  prophesying  the  effect  of  a  change  in  taxation  on 
real  estate  is  that  the  land  and  building  can  be  seperated  only  in 
theory,  as  they  remain  in  practice  inseparable.  I  think  that  this  is  one 
reason  why  many  people  do  not  estimate  that  there  will  be  any  increase 
in  selling  price  or  value  of  property  where  the  value  of  the  building 
exceeds  the  value  of  the  land  and  where  the  tax  burden  will  be  dimin- 
ished. I  think  that  such  a  result  would  occur  for  a  short  time  and  thi§ 
seems  to  be  conceded  in  part  by  all  those  who  reason  that  the  untaxing 
of  buildings  would  lead  to  an  increase  of  new  buildings.     As  I  have 

375 


t 


I 

I 


stated  before,  I  cannot  see  any  advantage  to  the  tenant  in  lower  rents 
except  through  new  buildings. 

I  note  your  saying  clause  regarding  the  improving  of  vacant  land 
which  IS  ripe  for  improvement,"  and  the  working  out  of  this  experi- 
ment would  depend  largely  upon  a  correct  judgment  as  to  what  land 
IS  or  IS  not  ripe  for  improvement."  I  do  not  subscribe  to  the  theory 
that  any  considerable  amount  of  land  is  held  out  of  the  market  My 
experience  has  been  that  practically  all  vacant  land  is  for  sale  al- 
though, of  course,  a  difference  of  opinion  as  to  the  selling  price  of  the 
land  between  seller  and  buyer  acts  as  a  check  on  purchase  and  im- 
provement of  such  land.  I  do  not  think  that  a  gradual  change  in  the 
direction  of  untaxing  buildings  would  lead  to  any  wild  building  boom 
Too  many  forces  are  involved,  especially  those  engaged  in  the  business 
of  financing  new  building  operations  who  have  so  much  to  lose  by  any 
such  boom  that  they  would  surely  check  it. 

Referring  to  your  statement  on  Page  3,  I  have  always  made  the 
statement  that  vacant  land  has  no  value,  but  usually  has  a  selling  price 
which  is  speculative  in  the  sense  that  it  cannot  be  surely  known  what 
rental  will  be  earned  from  a  new  building  to  be  capitalized  into  land 
value.  I  do  not  follow  you  in  your  statement  that  "the  actual  agtrre- 
gate  value  of  all  land  within  the  taxing  district  is  no  more  than  the 
capitalized  value  of  the  aggregate  net  ground  rentals  actually  paid  for 
the  use  of  the  land  at  any  given  time."  What  becomes  of  the  vacant 
land  within  the  taxing  district  on  which  taxes  are  paid  on  a  basis  of 
estimated  value  for  future  improvement?  Further,  I  do  not  see  how 
you  can  eliminate  speculative  value  entirely  in  any  calculation.  What 
might  be  called  speculative  value  is  really  future  value,  which  is  tht 
element  above  or  below  the  "intrinsic  value"  due  to  the  capitalization 
of  present  rents  at  present  interest  rates.  I  think  that  the  average  of 
this  speculative  element  varies  from  a  minor  quantity  up  to  thirty  or 
forty  per  cent,  of  the  selling  price  of  improved  land.  I  should 
imagine  that  if  New  York  City  should  stop  growing  and  it  were  certain 
that  it  would  never  increase  in  population  again,  the  total  values  would 
fall  off  twenty  or  thirty  per  cent.  I  know  that  many  owners  and  lend- 
ers on  real  estate  are  alarmed  at  the  prospect  in  the  change  of  the 
method  of  taxation.  Possibly  they  are  right,  but,  for  myself,  I  feel 
that  it  would  be  only  one  of  many  elements  and,  if  applied  gradually 
and  in  connection  with  a  far-seeing  plan  of  limitation  of  the  height  of 
buildings  and  the  letting  out  of  zones  suitable  to  a  city  of  ten  mil- 
lion population,  as  Mr.  Schiff  outlines,  I  think  the  whole  plan  would 
result  advantageously  to  the  city. 

Very  sincerely  yours, 

(Signed)     R.  M.  HLFRD. 


876 


BILLS  PREPARED  BY  THE 

COMMITTEE 


I 


iMMtfMi 


r 


BILL  FOR  ABILITY  OR  PRESUMPTIVE  INCOME  TAX. 

the  ^e^J!l\7^^}^  •'''"  "^^^  prepared  with  a  view  to  its  introduction  at 
wLS  th.V.1,    °\°i  ',9'5'  and  has  not  been  subjected  to  revSon 
moffl^  '  '"'''''"'"  P""°P°^^^  f^"-  the  habitation  tax  has  b^n 

t.in  '^^l  '''"'  •^-  °"&'"^"y  drawn,  and  as  reprinted  here,  does  not  con- 
n=        I  P>-?v>sion  recommended  in  the  majority  report    V^tnll  t^ 
payer    he  nght  to  declare  and  prove  his  actual  income  and  to  have^' 
duced  to  one  per  cent,  thereof  a  tax  exceeding  that  amount 


ABILITY  TAX. 

An  Act  to  provide  for  additional  taxes  in  the  City  of  New  York. 

AsseI'bV!'r ;L1  t%f ii^t  :^  ^^"  ^°^'^'  ^^P--*^^  -  Senate  and 
Article  I.     Definitions. 

Habitation   tax. 
Occupation    tax. 

Assessment,  payment  and  collection  of  habitation  tax 

and   occupation   tax. 
Salaries  tax. 
General  provisions. 


2. 

3- 
4- 

5- 
6. 


ARTICLE  I. 

Definitions. 

Section  i.     Definitions. 

quirld-  by^'fhJtntext';"  *''  ''""'P^"  °'"  '''''  ''''  ""'"^  °'*'"-'^-  '^ 
(i)  the  word  "Business"  shall  be  deemed  to  include  business   trade 
professions,  agriculture  and  any  other  gainful  occupation,  and  any  othe; 
use  of  real  property  other  than  as  a  habitation  •  ^ 

(2)  the  words  "Business  premises"  shall  mean  real  property  or  anv 
portion  thereof,  occupied  or  used  exclusively  for  purposes '^f  business^ 
If  real  property,  or  a  portion  thereof,  is  used  both  for  purposes  of  butt: 
ness  and  as  a  place  of  abode,  such  proportion  thereof  as  is  used  for 

SnrTion'th°^  ^T"''-'  '^^^}  ^^  "^^T"^  ''"^'"^^^  Pre'^i^es,  and  such  p^ 
portion  thereof,  as  is  used  as  a  place  of  abode,  shall  be  deemed  a  habt 
tation.  and  the  rental  value  shall  be  apportioned  accordingly 

(3)  the  word  "Habitation"  shall  mean  real  propertyf  or  any  oor- 

!ZI  /?  '  ru   "'  t  fr'  ""l  ^'^"'^^  ^y  °"^  °'^^'^  persons  con'Tti- 
tuting  a  single  household,  or  by  one  or  more  tenants,  ^ests,  lodgers 

or  other  persons  havmg  no  household.    The  habitation  shall  be  deemed 

to  include  all  portions  of  real  property  to  the  exclusive  use  of  which 

in  connection  with  such  habitation,  the  occupier  is  entitled,  and  the 

379 


proportionate  share  of  all  portions  of  the  real  property,  to  the  use  oi 
which  in  connection  therewith  such  occupier  is  entitled  in  common  with 
others,  such  proportion  being  determined  by  the  share  of  use  to  which 
each  is  entitled.  Real  property  occupied  exclusively  for  a  boarding 
house,  excepting  such  portion  thereof  as  is  the  boarding  house  keeper's 
personal  habitation,  shall  not  be  deemed  the  habitation  of  the  board- 
ing house  keeper,  but  shall  as  to  him  be  deemed  to  be  business  premises; 

(4)  the  words  "Habitation  tax"  shall  mean  the  tax  provided  for 
by  Article  2; 

(5)  the  words  "Occupation  tax"  shall  mean  the  tax  provided  for 
by  Article  3; 

(6)  the  word  "Occupier"  shall  mean  an  owner  in  possession  of  a 
habitation  or  business  premises; 

(7)  the  word  "Owner"  shall  mean  any  person  having  any  estate 
or  interest  in  real  property  or  portion  thereof,  including  a  tenancy  with 
or  without  a  lease  and  with  or  without  a  definite  term ; 

(8)  the  word  "Rental"  shall  be  deemed  to  mean  such  sum  per 
annum  as  results  from  a  computation  based  upon  all  sums  agreed  to  be 
paid  for  the  use  or  occupation  of  real  property  or  a  portion  thereof 
during  any  part  of  the  preceding  year  ending  on  the  first  Monday  of 
November,  including  all  taxes,  assessments  or  other  payments  paid  or 
agreed  to  be  paid  by  the  occupier  in  connection  therewith,  whether  paid 
to  an  owner  or  to  the  public  authorities  and  also  including  all  sums 
paid  as  part  of  the  rental  for  light,  heat  or  other  services  or  conveni- 
ences, but  excluding  sums  paid  for  board ; 

(9)  the  words  "Rental  value"  shall,  in  case  of  a  letting  for  an  agreed 
sum  of  money  constituting  the  exclusive  payment  for  the  use  and  occu- 
pation of  the  habitation  or  business  premises,  mean  the  rental  computed 
on  the  basis  of  one  year.  In  all  other  cases  the  rental  value  shall  be 
deemed  to  be  seven  per  centum  of  the  value  of  the  real  property  as 
shown  on  the  last  preceding  annual  record  of  the  assessed  value  of  real 
and  personal  estate  of  the  borough ;  provided,  however,  that  the  rental 
value  shall  in  no  case  be  deemed  to  be  less  than  the  rental  as  defined 
in  subdivision  eight  of  this  section.  If  the  habitation  or  business  prem- 
ises shall  constitute  a  portion  of  a  lot  or  parcel  separately  assessed,  the 
apportioned  part  of  the  total  assessment  shall  be  deemed  to  be  the  as- 
sessed value  of  the  habitation  or  business  premises,  and  seven  per 
centum  thereof  shall  be  deemed  the  rental  value  thereof; 

(10)  the  words  "Salaries  tax"  shall  mean  the  tax  provided  for 
in  Article  5; 

(11)  the  word  "Salary"  shall  be  deemed  to  include  all  salaries, 
wages,  commissions,  gratuities,  emoluments,  perquisites,  and  other 
compensation  of  whatever  kind  and  in  whatever  form  paid,  received  or 
earned,  for  services  performed  for  an  employer  transacting  business  in 
the  City  of  New  York  in  or  in  connection  with  such  business,  or  per- 
formed for  the  City  of  New  York  or  the  State  of  New  York,  but  shall 
not  include  any  sums  paid  for  services  rendered  to  the  government  of 
the  United  States,  nor  the  salaries  of  judges  who  are  protected  by  con- 
stitutional limitations  during  the  period  for  which  they  have  heretofore 
been  elected. 

380 


ARTICLE  2. 
Habitation  Tax. 

Section    2.     Habitation  tax. 

3.  By  whom  to  be  paid. 

4.  Rates  of  tax. 

assels^ed  ^nll^t^^H^'  ^f '  ?''"  ^^hereby  imposed,  and  shall  be  levied, 
n/f^n  of  ^' K  ""^  P^'"^.  ^"""^"y>  a  tax  with  respect  to  the  occu- 

pation of  every  habitation  m  the  City  of  New  York  having  a  rental 
value  of  six  hundred  dollars  or  more. 

fircf  m"  ?^  "^^T  ^''u^^  ^^''^-  ''  ^"^^"y  P^^so"  who  shall,  on  the 
first  Monday  of  November,  in  the  year  nineteen  hundred  and  fifteen  or 
n  any  subsequent  year,  being  the  owner  in  fee  or  for  one  or  mor' 
lives  or  or  a  leasehold  term  of  not  less  than  one  year  of  a  habitS 
in  said  city  having  a  rental  value  of  six  hundred  dollars  or  more   be  an 

?esn?;f7^  '"'.^  habitation,  shall  be  liable  to  pay  the  habitation  tax  with 
respect  to  such  habitation. 

in  =.„„  ^:,  ■  ^^^7  Pe^on  wl'o  shall,  during  the  greater  number  of  days 
in  any  period  of  three  consecutive  months  within  the  period  of  one 
dred  ^ndTf/"'  ""'''  ^^^^ay  of  November  in  the  year  nineteen  hun! 
dred  and  fifteen  or  in  any  subsequent  year,  have  been  an  occupier  of 
Hr.d  H  T'^  habitations  in  said  city  having  a  rental  value  of  six  hun- 
dred dollars  or  more  shall  be  liable  to  pay  the  habitation  tax  with 
reference  to  such  habitation,  or,  if  there  be  more  than  one.  with  re" 

Shl^r  M^f  °"'  °""?'"^  ^y  ^'"^  ''"""g  «^'d  P«"°d,  but  no  person 
shall  be  liable  to  pay  said  tax  who  shall  not  be  such  an  occupier  at 
any  time  after  the  enactment  of  this  chapter. 

u„JA  ;^^^(  °*  *^-     '^''^  habitation  tax  shall  be  at  the  rate*  com- 

?"S  TotwijTable :°  *''  ""*''  ^^'"^  "'  '""^  *'^'''*^*'°"  ^^  ^P^-fi^'* 


Rental. 


Multiplier.     Presumptive  Income.     Taxable  Income.  Tax. 


$600- 

$700 

700- 

800 

800- 

900 

900- 

1,000 

1,000- 

1,100 

1,100- 

1,250 

1,200- 

1,300 

1,300- 

1,400 

1,400- 

1,500 

1,500- 

1,600 

1,600- 

1,700 

1,700- 

1,800 

1,800- 

1,900 

1,900- 

2,000 

2,000- 

2,100 

2,100- 

2,200 

2,200- 

2,300 

2,300- 

2,400 

2,400- 

2,500 

2,500- 

2,600 

2,600- 

2,700 

2,700- 

2,800 

2,800- 

2,900 

3,900- 

3,000 

3,000- 

3,100 

3,100- 

3  200 

5 

5 

5 

5 

5 

5 

5 

5 

5 

5 

5 

5 

5 

5 

5.1 

5.1 

5.2 

5.2 

5.3 

5.3 

5.4 

5.4 

5.5 

5.5 

5.6 

5.6 


$3,500 

4,000- 

4,500- 

5,000- 

5,500- 

6,000- 

6,500- 

7,000- 

7,500- 

8,000- 

8,500- 

9,000- 

9,500- 

10,000- 

10.710- 

11,220- 

11,960- 

12,480- 

13,250- 

13,780- 

14,580- 

15,120- 

15,950- 

16.000- 

17,360- 

17,0*>0- 


$2,000 
2,000 
2,000 
2,000 
2,000 
2.000 
2,000 
2,000 
2,000 
2,000 
2,000 
2,000 
2,000 
2,000 
2,000 
2,000 
2,000 
2,000 
2,000 
2,000 
2,000 
2,000 
2,000 
2,000 
2,000 
2,000 


$1,500 

2,000 

2,500 

3,000 

3,500 

4,000 

4,500 

5,000 

5,500 

6,000 

6,500 

7,000 

7,500 

8,000 

8,710 

9,220 

9,960 

10,480 

11,250 

11,780 

12,580 

13,120 

13,950 

14,500 

15,360 

15  920 


10 

IS 


3f 

m 

S5 


n 


104 
112 
118 
125 
131 
139 
145 
154 
1.-9 


I. 


381 


Renta 

1. 

Multiplier. 

Presumptive  Income. 

Taxable  Income. 
16,810 

Tax. 

3,200- 

3,300 

5.7 

18,810-  2,000 

168 

3,300- 

3,400 

5.7 

19,380-  2,000 

17,380 

174 

3,400- 

3,500 

5.7 

19,950-  2,000 

17,950 

180 

3,500- 

3,600 

5.8 

20,880-  2,000 

18,880 

188 

3,600- 

3,700 

5.8 

21,460-  2,000 

19,460 

195 

3,700- 

3,800 

5.9 

22,440-  2,000 

20,440 

204 

3,800- 

3,900 

5.9 

23,010-  2,000 

21,010 

210 

3,900- 

4,000 

5.9 

23,600-  2,000 

21,600 

216 

4,000- 

4,100 

6 

24,600-  2,000 

22,600 

226 

4,100- 

4,200 

6.1 

25,620-  2,000 

23,620 

236 

4,200- 

4,300 

6.2 

26,660-  2,000 

24,660 

246 

4,300- 

4,400 

6.3 

27,720-  2.000 

25,720 

257 

4,400- 

4,500 

6.4 

28,800-  2,000 

26,800 

268 

4,500- 

4,600 

6.5 

29,900-  2,000 

27,900 

279 

4,600- 

4,700 

6.6 

31,020-  2,000 

29,020 

290 

4,700- 

4,800 

6.7 

32,160-  2,000 

30,160 

301 

4,800- 

4,900 

6.8 

33,320-  2,000 

31,320 

313 

4,900- 

5,000 

6.9 

34,500-  2,000 

32,500 

325 

5,000- 

5,200 

7 

36,400-  2,000 

34,400 

344 

5.200- 

5,400 

7 

37,800-  2,000 

35,800 

358 

5,400- 

5,600 

7 

39,200-  2,000 

37,200 

372 

5,600- 

5,800 

7 

40,600-  2,000 

38,600 

386 

5,800- 

6,000 

7 

42,000-  2,000 

40,000 

400 

6,000- 

6,200 

7.1 

44,020-  2,000 

42,040 

420 

6,200- 

6,400 

7.1 

45,440-  2,000 

43,440 

434 

6,400- 

6,600 

7.2 

47,520-  2,000 

45,520 

455 

6,600- 

6,800 

7.2 

48,960-  2,000 

46,960 

470 

6,800- 

7,000 

7.3 

51,100-  2,000 

49,110 

491 

7,200- 

7,400 

7.3 

52,560-  2,000 

50,560 

506 

7,400- 

7,600 

7.4 

54,760-  2,000 

52,760 

528 

7,600- 

7,800 

7.4 

56,240-  2,000 

54,240 

542 

7,800- 

8,000 

7.5 

60,000-  2,000 

58,000 

580 

8,000- 

8,200 

7.5 

61,500-  2,000 

59,500 

595 

8,200- 

8,400 

7.6 

63,840-  2,000 

61,840 

618 

8,400- 

8,600 

7.6 

65,360-  2,000 

63,360 

634 

8,600- 

8,800 

7.7 

67,760-  2,000 

65,760 

659 

8,800- 

9,000 

7.7 

70,300-  2,000 

68,300 

683 

9,000- 

9,200 

7.8 

71,760-  2,000 

69,760 

698 

9,200- 

9,400 

7.8 

73,320-  2,000 

71,320 

713 

9,400- 

9,600 

7.9 

75,840-  2,000 

73,840 

738 

9,600- 

9,800 

7.9 

77,420-  2,000 

75,420 

754 

9,800- 

10,000 

7.9 

79,000-  2,000 

77,000 

770 

10,000- 

10,200 

8 

81,600-  2,000 

79,600 

796 

10,200- 

10,400 

8.1 

84,240-  2,000 

82,240 

822 

10,400- 

10,600 

8.2 

86,920-  2,000 

84,920 

849 

10,600- 

10,800 

8.3 

89,640-  2,000 

87,640 

876 

10,800- 

11,000 

8.4 

92,400-  2,000 

90,400 

904 

11,000- 

11,200 

8.5 

95,200-  2,000 

93,200 

932 

11,200- 

11,400 

8.6 

98,040-  2,000 

96,040 

960 

11,400- 

11,600 

8.7 

100,920-  2,000 

98,920 

989 

11,600- 

11,800 

8.8 

103,840-  2,000 

101,840 

1,018 

11,800- 

12,000 

8.9 

106,800-  2,000 

104,800 

1,048 

12,000- 

12,250 

9 

109,800-  2,000 

107,800 

1,078 

12,200- 

12,400 

9.2 

114,080-  2,000 

112,080 

1,120 

12,400- 

12,600 

9.4 

122,440-  2.000 

120,440 

1,204 

12,600- 

12,800 

9.6 

125,880-  2,000 

123,580 

1,238 

12,800- 

13,000 

9.8 

127,400-  2,000 

125,400 

1,254 

13,000- 

13,250 

10 

132,000-  2.000 

130,000 

1,300 

13,200- 

13,400 

10.2 

136,680-  2,000 

134,680 

1,346 

13,400- 

13,600 

10.4 

141,440-  2,000 

139,440 

1,394 

13,600- 

13,800 

10.6 

146,200-  2,000 

144,200 

1,442 

13,800- 

14,000 

10.8 

151,200-  2,000 

149,200 

1,492 

14,000- 

14,200 

11 

156,200-  2,000 

154,200 

1.542 

14,200- 

14,400 

11.2 

161,280-  2,000 

159,280 

1,593 

14,400- 

14,600 

11.4 

166,440-  2,000 

164,440 

1,644 

14,600- 

14,800 

11.6 

171,680-  2,000 

169,680 

1,696 

Rental. 


Multiplier.     Presumptive  Income.     Taxable  Income.  Tax. 


n 


14,800- 
15,000- 
15,200- 
15,400- 
15,600- 
15,800- 
16,000- 
16,200- 
16,400- 
16,600- 
16,800- 
17,000- 
17,200- 
17,400- 
17,600- 
17,800- 
18,000- 
18,200- 
18,400- 
18,600- 
18,800- 
19,000- 
19,200- 
19,400- 
19,600- 
20,000- 
21,000- 
1^2,000- 
23,000- 
24,000- 
«5,000- 
26,000- 
28,000- 
30,000- 
35,000- 
40,000- 
50,000- 
60,000- 
70,000- 
80,000- 
90,000- 


15,000 
15,200 
15,400 
15,600 
15,800 
16,000 
16,200 
16,400 
16,600 
16,800 
17,000 
17,200 
17,400 
17,600 
17,800 
18,000 
18,200 
18,400 
18,600 
18,800 
19,000 
19,200 
19,400 
19,600 
19,800 
21,000 
22,000 
23,000 
24,000 
25.000 
26,000 
28,000 
30,000 
35,000 
40,000 
50,000 
60,000 
70.000 
80,000 
90,000 
100,000 


11.8 

12 

12.2 

13.4 

12.6 

12.8 

13 

13.2 

13.4 

13.6 

13.8 

14 

14.2 

14.4 

14.6 

14.8 

15 

15.3 

15.4 

15.6 

15.8 

16 

16.3 

16.4 

16.6 

16.8 

17 

17 

17 

17 

17 

17 

17 

17 

17 

17 

17 

17 

17 

17 

17 


177,000- 
182.400- 
187.880- 
193,440- 
199,080- 
204,800- 
210.600- 
216.400- 
222,440- 
228,400- 
234,600- 
240,000- 
247,080- 
253,440- 
259,880- 
266,400- 
273,000- 
279.680- 
286,440- 
293,280- 
300.200- 
307,200- 
314,280- 
321.440- 
328.680- 
353,800- 
374,000- 
391,000- 
408,000- 
425,000- 
442.000- 
476.000- 
510,000- 
595,000- 
680,000- 
850,000- 
1,020,000- 
1,190,000- 
1,360,000- 
1,530,000- 
1,700,000- 


2,000 

2,000 

2,000 

2,000 

2,000 

2,000 

2,000 

2,000 

2,000 

2,000 

2,000 

2,000 

2,000 

2,000 

2,000 

2,000 

2,000 

2,000 

2,000 

2,000 

2.000 

2,000 

2,000 

2,000 

2,000 

2,000 

2,000 

2,000 

2,000 

2,000 

2,000 

2,000 

2,000 

2.000 

2.000 

2,000 

2,000 

2,000 

2,000 

2,000 

2,000 


175,000 
180,400 
185,880 
191,440 
197.000 
202,800 
208,600 
214,480 
220,440 
226,400 
232,600 
238,000 
245,080 
251,440 
257,880 
264,400 
371,000 
277,680 
284,440 
291,280 
298,200 
305,200 
312,280 
319,440 
326,680 
333,800 
372,000 
389,000 
406,000 
423,000 
440,000 
474,000 
508,000 
593,000 
678,000 
848,000 
1,018,000 
1,188,000 
1,358,000 
1,528,000 
1,688,000 


1,750 
1,804 

1,859 
1,914 
1,970 
2,028 
2,086 
3.144 
2.204 
2,264 
2,326 
2,380 
3,450 
2,514 
2,578 
2,644 
2,710 
2,776 
2,844 
2,913 
2,913 
3,052 
3,132 
3,194 
3,266 
3,338 
3.720 
3,890 
4,060 
4,230 
4,400 
4,740 
5,080 
5,930 
6.780 
8,480 
10,180 
11.880 
13,580 
15,280 
16,880 


Note.— On  rentals  over  $100,000,  multiply  by  17.  deduct  $2,000  and  take  1%. 


Section 


7- 
8. 

9. 

lO. 

II. 


ARTICLE  3. 
Occupation  Tax. 

Occupation  tax. 


382 


By  whom  to  be  paid. 
Rate  of  tax. 

Certain   corporations   not   liable   for  occupation   tax. 
Exemptions. 

§7-  Occupation  tax.  There  is  hereby  imposed,  and  shall  be  levied, 
assessed,  collected  and  paid  annually,  a  tax  with  respect  to  the  occupa- 
tion of  every  business  premises  in  the  City  of  New  York  having  a  rental 
value  of  six  hundred  dollars  or  more. 

§8.  By  whom  to  be  paid.  Every  person  who,  on  the  first  Mondav 
of  November,  m  the  year  nineteen  hundred  and  fifteen,  or  in  any  sub- 
sequent year,  shall  be  an  occupier  of  business  premises  in  said  city  hav- 

383 


ing  a  rental  value  of  six  hundred  dollars  or  more,  shall  be  liable  to 
pay  an  occupation  tax  with  reference  to  such  business  premises." 

§9.  Rates  of  tax.  The  amount  of  the  occupation  tax  shall  be  as 
follows:  From  an  amount  equal  to  seven  per  centum  of  the  rental 
value  of  the  business  premises,  there  shall  be  deducted  the  sum  of 
twenty  dollars  in  every  case,  and  the  remainder  shall  be  the  amount 
of  the  occupation  tax. 

§10.  This  article  shall  not  apply  to  any  cor])oration  organized  under 
the  provisions  of  the  railroad  law,  the  transportation  corporations  law, 
or  under  chapter  four  of  the  laws  of  eighteen  hundred  and  ninety-one, 
entitled,  "An  Act  to  provide  for  rapid  transit  railways  in  cities  of  over 
one  million  inhabitants." 

§11.  Exemptions.  An  occupier  of  real  property  or  portion  thereof 
which  is  by  law  exempt  from  the  tax  on  real  property  shall  not  be 
required  to  pay  an  occupation  tax  with  reference  to  such  real  property 
or  portion  thereof. 


ARTICLE  4. 

Assessment,  Payment  and  Collection  of  Habitation  Tax  and  Occupation 

Tax. 


Section  13. 

14. 

15- 
16. 

17- 
18. 

19- 
20. 

21. 

22. 

23- 
24. 

25- 

26. 

27. 

28. 

29. 
30. 


Application  of  article. 

Returns. 

Penalty  for  failure  to  make  return. 

Assessments  and  record  thereof. 

Death  or  erroneous  description  of  person  liable  to  tax. 

Applications  for  correction  of  assessment. 

Correcting  and  adding  to  assessment  record. 

Obtaining  information  and   examining  witnesses. 

Certiorari. 

Preparation  of  assessment  roll  and  warrant  for  col- 
lection. 

Delivery  of  assessment  rolls  and  warrant  to  receiver 
of  taxes. 

Where  tax  due  and  payable. 

Receiver  of  taxes  to  give  public  notice. 

Tax  when  due  and  payable. 

Interest  upon  unpaid  taxes. 

Collection  of  unpaid  tax  by  distress  and  sale. 

Recovery  of  unpaid  tax  by  action. 

Lien  of  tax  and  enforcement  thereof. 


§13.  Application  of  article.  This  article  shall  apply  to  tlie  habita- 
tion tax  and  to  the  occupation  tax. 

§14.  Returns.  Every  owner  of  any  real  property  in  said  city 
which,  or  any  part  of  which,  is  a  habitation  having  a  rental  value  of 
five  hundred  dollars  or  more,  or  business  premises  having  a  rental 
value  of  six  hundred  dollars  or  more,  and  every  person  who  shall,  at 
any  time  during  the  period  of  one  year  ending  on  the  first  Monday  of 
November,  in  the  year  nineteen  hundred  and  fifteen,  or  in  any  subse- 
quent year,  have  been  an  owner  of  any  such  real  property,  shall,  be- 
tween the  first  and  fifteenth  days  of  November,  in  person  or  by  duly 
authorized  agent,  make  and  file  with  the  Department  of  Taxes  and  As- 

384 


sTa^b^"  p^etrfbedlTsaidT'"  f  ""'^"^  ""^^  ^^^  -  -ch  form  as 
person  wL^^^hL^'at^^^^^^^^^^^  .name  of  ever>^ 

pier  of  anv  such  ViaKi'fofi^^  uumi^   saia  perioa,   ha.e   Deen   ar        ~u- 

paid  by  such  persoSf  l^'d  suctTh"'-Pf'™"^^^  '""^  ^^"^^  ^^-^^  to  b. 
by  said  department  ^^^^  mformat.on  as  shall  be  required 

erence  to  any  hah\i:^^^  I    k  ^  ^^^^  ^"'^  ^'^  '''  return  with  ref- 

shall  be  liaWe  Z^ZTLI^^TT^  P'"'"''''  ^^"^  ^l^^"  '«"  to  do  so 
case  may  be,  wTth'^rLrence  there?"  '""Vl  '\  °^^"pation  tax.  as  the 
person  shall  be  deemed  f^L^'  ^"'^  ^°'"  ^^^  P""-p°se  thereof  such 
business  premLs  on  the  firs?  M '"h  ^"  ""TT''  °^  '^'^'^  habitation  or 
which  he  was  required  to  ZX  ""u^^  °'  November,  of  the  year  in 
be  guilty  of  a  r^isdemeanor  and  Tl,  '■''''''..■  ^""'^  P^''°''  ^^all  also 
ties,  be  liable  to  a  pTnakv  of  if  f  '  ^"  fiT""  '°  ^"  ^'her  liabili- 
penalty  of  ten  dollars  for  ?.rhr^''""^^«^,'^°»"s  ^"^  a"  additional 

to  be  recovered  bTacti^nbTouitir"^  ""^'"j  '^'  ''"^""•*  '^°"*'""'^ 
by  the  corporation  counsel  of^^i)  -^  '°"'"u  °^  '^'^™P«ent  jurisdiction 
said  city.  °*  '""'  •'■'y  •"  the  name  and  on  behalf  -{ 

§16,    Assessments  and  record  tViPr»«f     -ru      , 
and  assessments  of  said  citv  T,ll  J^,"  ''^T-artiiicir.   of  taxe. 

occupation  tax,  and  shall  ca'^set  IfT  l^'  ^^f^'tation  tax  and  the 
tablished  by  the  said  deoarWnf  h  u^^*  '"-^''^  '«^«'"^'  o^^es.  es- 
in  such  form  as  sh^  be'^detTrm  ^pH      '  *=7'^'"*"&  ^  detailed  record 

the   taxes   so   assessei.'^aylbTe""  th    r'efe"re''c^^  '^P^-"^"'^"*  °! 

habitations  and  of  business  nremise,^  in  Vh  ,  .      °<=<:tipation   of 

city.     Such  record  books  shTlhT^^l     f      "  l^,-"?'  boroughs  of  said 

tion  and  correctionXm  th  '  fi'f  e^^t"  d"v':rf'"nV"T<^^'°"' r^'"'- 
teenth  day  of  January  in  each  velr  Th/^  °i  December  until  the  fif- 
and  during  the  time  the  sa^dhnnl=  ^^"^  department,  previous  to 

shall  advertise  t^T^ct  in^Je'ci';  Re'cor'd"  ''  ''""^"'^  '°'  '"^P-*'"^"" 

I.  No'tax'^of assTssmTnTsTall  IT^"^"^  "'  ^"1°"  "^'^'^  '^  »-• 
person  liable  to  pay  tTe  same  If^er  Thl  fiT^f  "J  '*'!  '^^^'^  °*  «"y 
the  year  for  which  such  tax  sh. Ik.  ''^  ^""^^-^^  °^  November  in 

be  lawful  to  Tssess  the  tlx  afat^^^t  t,  T°'''' '  ''"^  '"  '"^^  ^^^^  't  shall 

representatives,  and  in  e.thef  case  the  r/'°"  ?■■  "^"'""^t  ^''  P"'^^^^ 
be  liable  therefor  ^^  personal   representatives   shall 

provided  in  subdT;L'n  one  of  th?,%Son'"'"*^'  '""P*  ''  °**'^^*'^'= 

that^th'e  sald^at^han^rrn'i^  plbHc"""^':^-     °""?^  ^"^^  ^-^ 

plkation  may  be  -de^Syln^^-erron^cSrm  nT^o'^j^e^^g^tv^eT^^^  Z 
assessment  of  any  tax  to  have  tfi^  corr,^  ^         ^  J     ^^ggrievea  by  the 

shall  be  in  writin^g,  t^  suchTrm'LTa  ,  be^reTutred'bfsaTd''^*'^" 
ment,  and  shall  state  the  ground  of  obiection  Thlt  J  f^  **^P^"" 
assesments  of  said  city  sLll  examine^fhe  appSion'^lid  if*Tthe"ir 
Sr'eTted.   '''  """'"^"*  "^  "'°"^""^  ^''^^  '»>'"«"-  the' s'ame"  toZ 

385 


§19-  Correcting  and  adding  to  assessment  record.  On  or  before 
the  fifteenth  day  of  February  of  any  year,  the  said  Board  shall  have 
power,  on  complaint  or  otherwise,  to  correct  or  add  to  the  said  record 
by  correcting,  reducing  or  increasing  any  assessment  or  by  adding  a 
new  assessment;  but  no  assessment  shall  be  increased  and  no  new 
assessment  shall  be  added  without  ten  days'  previous  notice  to  be 
mailed  to  the  person  affected  at  his  last  known  residence  or  business 
address.  An  affidavit  of  mailing  such  notice  shall  be  filed  in  the  main 
office  of  said  department.  Any  person  affected  by  the  proposed  action 
may  file  with  said  department,  within  five  days  after  the  mailing  thereof, 
objections  in  writing  to  the  proposed  action  in  such  form  as  shall  be 
prescribed  by  said  department.  Such  objections  shall  be  examined  and 
considered  by  said  Board  before  taking  action. 

§20.  Obtaining  information  and  examining  witnesses.  The  board 
of  taxes  and  assessments  and  any  member  thereof  shall  have  power  to 
investigate  and  inquire  into  all  matters  deemed  by  it  necessary  to 
enable  it  to  prepare,  correct  or  add  to  the  record  hereinabove  provided 
for,  and  to  subpoena  and  require  the  attendance  of  witnesses  and  the 
production  of  books  and  papers  pertinent  to  the  investigations  and  in- 
quiries hereby  authorized  and  to  examine  them  in  relation  to  any  such 
matter.  It  may  delegate  to  one  or  more  deputy  tax  commissioners  any 
of  the  powers  conferred  by  this  section. 

§21.  Certiorari.  Certiorari  to  review  or  correct  on  the  merits  any 
final  determination  of  the  board  of  taxes  and  assessments  made  under 
the  provisions  of  this  act  may  be  prosecuted  in  like  manner  and  upon 
the  same  grounds  and  subject  to  the  same  provisions  of  law  as  a 
certiorari  to  review  or  correct  an  assessment  of  real  or  personal  estate 
in  said  city  made  by  said  board. 

§22.  Preparation  of  assessment  roll  and  warrant  for  collection 
thereof.  Beginning  with  the  fifteenth  day  of  February  in  each  year, 
the  said  board  of  taxes  and  assessments  shall  cause  to  be  prepared 
from  the  books  of  record  of  assessments  of  habitation  tax  and  occupa- 
tion tax  in  the  several  offices  of  the  said  department  in  the  several 
boroughs,  assessment  rolls  for  each  of  the  said  boroughs  and  shall,  as 
soon  as  such  rolls  are  completed,  annex  to  each  of  the  said  rolls  its 
certificate  that  the  same  is  correct  and  in  accordance  with  the  entries 
in  the  said  several  books  of  record.  Thereafter  the  said  board  shall 
prepare  and  sign  its  warrant  authorizing  and  requiring  the  receiver  of 
taxes  of  said  city  to  collect  from  the  several  persons  named  in  the  as- 
sessment rolls  the  several  sums  set  opposite  to  their  respective  names 
and  to  pay  the  same  from  time  to  time,  when  so  collected,  to  the 
chamberlain  of  said  city. 

§23.  Delivery  of  assessment  rolls  and  warrant  to  receiver  of  taxes. 
The  said  board  shall  cause  the  assessment  rolls  of  each  borough  when 
corrected  with  the  said  warrants  annexed  to  be  delivered  to  the  said 
receiver  of  taxes  on  or  before  the  first  day  of  March. 

§24.  Where  tax  due  and  payable.  The  receiver  of  taxes,  upon 
receiving  the  assessment  rolls  and  warrants,  shall  immediately  cause 
the  same  for  each  of  the  several  boroughs  wherein  he  shall  have  an 
office  to  be  deHvered  at  and  filed  in  such  office  and  shall  thereafter 
proceed  to  collect  and  receive  said  taxes  from  the  several  persons  as- 
sessed in  said  assessment  rolls. 

§25.  Receiver  of  taxes  to  give  public  notice.  The  receiver  of  taxes 
shall  immediately   after  he   shall  have   received   the   assessment   rolls, 

386 


give  public  notice  for  at  least  five  days  in  the  City  Record  that  said 
assessment  rolls  have  been  delivered  and  that  all  taxes  will  be  due 
and  payable  at  his  office  in  said  respective  boroughs  on  the  fifteenth 
day  of  March  next  ensuing. 

§26.  Tax  when  due  and  payable.  The  said  tax  shall  be  due  and 
payable  on  the  fifteenth  day  of  March. 

§27.  Interest  upon  unpaid  taxes.  If  any  tax  or  portion  thereof 
shall  remain  unpaid  on  the  fifteenth  day  of  April,  after  it  shall  become 
due  and  payable,  it  shall  be  the  duty  of  the  receiver  of  taxes  to  report 
said  taxes  to  the  collector  of  assessments  and  arrears  of  said  city,  who 
shall  proceed  to  collect  the  same  and  shall  charge,  receive  and  collect 
upon  every  such  tax  or  portion  thereof  so  remaining  unpaid  on  that 
day,  interest  upon  the  amount  thereof,  at  the  rate  of  seven  per  centum 
per  annum  to  be  calculated  from  the  day  on  which  said  tax  became  due 
and  payable  to  the  day  of  payment;  and  such  interest  shall  be  paid 
over  and  accounted  for  by  such  collector  of  assessments  and  arrears 
from  time  to  time  as  a  part  of  the  tax  collected  by  him. 

§28.  Collection  of  unpaid  tax  by  distress  and  sale.  If  any  tax 
with  the  interest  thereon  or  any  portion  thereof  shall  remain  unpaid 
on  the  fifteenth  day  of  April  succeeding  receipt  by  the  receiver  of  taxes 
of  the  rolls,  the  collector  of  assessments  and  arrears  shall  proceed  to 
issue  his  warrant  under  his  hand  and  seal  directed  to  any  marshal  of 
said  city,  and  may  reissue  such  warrant  from  time  to  time,  commanding 
the  marshal  to  levy  said  tax  with  interest  thereon  as  herein  provided 
by  distress  and  sale  of  the  goods  and  chattels  of  the  person  liable  to 
pay  the  said  tax,  and  of  any  goods  and  chattels  in  the  possession  of  such 
person,  wheresoever  the  same  shall  be  found  within  the  said  city,  and  of 
any  goods  and  chattels  which  shall  have  been  in  the  habitation  or  busi- 
ness premises  on  the  day  when  the  tax  shall  have  become  due  and  pay- 
able, and  to  pay  the  same  to  the  said  receiver  and  return  such  warrant 
within  thirty  days  after  the  date  thereof.  Except  as  herein  provided, 
the  warrant  shall  be  in  like  form  and  the  marshal  shall  proceed  there- 
under and  all  other  proceedings  in  reference  thereto  shall  be  had  and 
taken  in  like  manner  as  in  the  case  of  a  warrant  for  the  collection  of 
taxes  for  personal  property  in  said  city.  Such  warrant  shall  be  suffi- 
cient authority  to  proceed  in  accordance  with  its  terms  whosoever  may 
be  the  owner  of  or  have  claims  against  the  property  which  may  be 
taken  in  accordance  therewith. 

§29.  Recovery  of  unpaid  tax  by  action.  Any  tax  with  the  interest 
thereon  or  portion  thereof  which  shall  remain  unpaid  on  the  fifteenth 
day  of  April,  after  it  shall  become  due  and  payable,  may  be  recovered 
by  the  said  collector  of  assessments  and  arrears  in  the  name  and  on 
behalf  of  the  said  city  in  an  action  in  any  court  of  competent  juris- 
diction. 

§30.  Lien  of  tax  and  enforcement  thereof.  Every  tax  and  the  in- 
terest thereon  shall  be  from  the  time  when  it  shall  become  due  and 
payable,  and  shall  continue  to  be,  until  paid,  a  lien  upon  the  interest 
of  the  person  against  whom  the  same  shall  be  assessed  in  the  real  prop- 
erty or  portion  thereof  with  respect  to  the  occupation  of  which  such 
tax  shall  be  assessed  and  shall  be  preferred  in  payment  to  all  other 
charges.  Any  such  lien  may  be  sold,  transferred,  enforced  and  dis- 
charged in  like  manner  as  tax  liens  for  taxes  upon  real  estate  in  the 
said  city. 


387 


ARTICLE  5. 
Salaries  Tax. 

Section  31.  Salaries  tax. 

32.  By  whom  to  be  paid. 

33.  Taxable  amount. 

34.  Exemption. 

35.  Rates  of  tax. 

36.  Tax  to  be  withheld  by  employers. 

37.  Return   by  employers. 

38.  Payment  of  tax  and  return   by  person   liable 

39.  Penalty  for  failure  to  file  return. 

40.  Obtaining  information  and  examining  witnesses. 

41.  Information   to  be  transmitted  to  receiver  of  taxes 

42.  Interest   upon   unpaid   taxes. 

43.  Recovery  of  unpaid  taxes  by  action. 

§31.     Salaries  tax.     There  is  hereby  imposed,  and  shall  be  levied 
assessed    collected  and  paid  annually  a  tax  with  respect  to  the  receipt 
of  all  salaries  amounting  in   the  aggregate  to  the  sum  of  $3,000  per 
annum  or  more.  '^  ^ 

.  §32.  By  whom  to  be  paid.  Every  person  who  shall  in  the  yeor 
nmeteen  hundred  and  fifteen  or  in  any  subsequent  year,  receive  a  salarv 
or  salaries  amounting  in  the  aggregate  to  the  sum  of  three  thousand 
the"eto  ''''  "''''*^'  ^'""^^^  ^'^  ^^^  *^^  ssilsLTies  tax  with  respect 

J33'  Taxable  amount.  The  aggregate  of  all  sums  received  by  any 
such  person  in  any  calendar  year  from  any  and  all  sources  and  with 
reference  to  which  said  tax  is  imposed  as  hereinbefore  provided  shall 
be  known  as  the  taxable  amount. 

§34-  Exemption.  There  shall  be  deducted  from  the  taxable  amounr 
two  thousand  dollars  thereof  which  shall  be  exempt  from  the  salaries 
lax. 

§35-  Rates  of  tax.  The  salaries  tax  shall  be  at  the  rate  of  one 
per  centum  upon  the  amount  by  which  the  taxable  amount  exceeds  two 
thousand  dollars  and  does  not  exceed  five  thousand  dollars;  two  per 
centum  upon  the  amount  by  which  the  taxable  amount  exceeds  five 
thousand  dollars  and  does  not  exceed  twenty  thousand  dollars-  three 
per  centum  upon  the  amount  by  which  the  taxable  amount  exceeds 
twenty  thousand  dollars  and  does  not  exceed  thirty  thousand  dollars  • 
four  per  centum  upon  the  amount  by  which  the  taxable  amount  ex- 
ceeds thirty  thousand  dollars  and  does  not  exceed  forty  thousand  dol- 
lars, and  five  per  centum  upon  the  amount  by  which  the  taxable  amount 
exceeds  forty  thousand  dollars. 

§36.  Tax  to  be  withheld  by  employers.  Every  person  who  shall  in 
the  year  nineteen  hundred  and  fifteen  or  in  any  subsequent  year  pay 
or  be  or  become  liable  for  a  salary  or  salaries  amounting  in  the  aggre- 
gate to  the  sum  of  three  thousand  dollars  or  more  to  any  person,  shall 
on  behalf  of  the  person  receiving  or  earning  the  same  deduct  and' with- 
hold from  the  payment  an  amount  equivalent  to  the  salaries  tax  there- 
on and  thereupon  the  person  receiving  the  salary  shall  cease  to  be 
under  any  further  liability  to  the  extent  of  the  sum  so  withheld  If 
the  person  receiving  or  earning  such  salary  shall  not,  therefore,  have 
received  the  benefit  of  the  exemption  provided  for  in  section  thirty- 
four,  the  amount  of  such  exemption,  or  so  much  thereof  as  has  not 

3S8 


,.  ,  ^^6^-     r'ayment  of  tax  and  return  bv  nf»rQrt«  h^ki-.      tt 

hab  e  to  pay  a  salaries  tpv    thl  1^1'     ^  person  hable.     Every  person 

partment    of    taxes    and    assessments    of    said    citv    a    return   VT  .     : 

guilty  of  a  misdemeanor  and  shall,  in  addition  to  all  other  liab^.V. 

§40.    Obtaining  information  and  examining  witnesses      The  boar.) 
of   taxes   and  assessments   of   said   city   and   any   member   thereof   shaU 

utZFarTLVc^n^'T  ^"^'"2r•-  «to  alfmatSr  deemed  by 
tV^  l^F.       ^^certain  persons  hable  or  amounts  payable  for  salaried 

Z'^J^A  *°  ^"''P°e"^  ^"d  to  require  the  attendance  of  witnesses  and 
the  production  of  books  and  papers  pertinent  to  the  inveSions  and 

SUCH  matters      It  may  delegate  to  one  or  more  deputy  tax  commU 
sioners  any  of  the  powers  conferred  by  this  section  ^ommis- 

§42.     Interest  upon  unpaid  taxes.     If  any  tax  or  portion' thereof 
shall  remain  unpaid  on  the  first  day  of  Februarv  aft^r  ft  Ih^u  I 
due  and  payable  as  hereinabove  provided  Tshall  be  the  dutv  of  tT' 
receiver  of  taxes  to  charge,  receive'^and  collect  upon  such  tax  or^^rtLn' 
thereof  so  rema.nmg  unpaid  interest  upon  the  amount  thereof  TJh" 

389 


rate  of  seven  per  centum  per  annum  to  be  calculated  from  the  first  day 
of  January  in  the  year  in  which  said  tax  became  due  and  payable  to  the 
day  of  payment;  such  interest  shall  be  paid  over  and  accounted  for  by 
such  receiver  from  time  to  time  as  a  part  of  the  tax  collected  by  him. 
§43.  Recovery  of  unpaid  tax  by  action.  Any  tax  with  the  interest 
thereon  or  portion  thereof  which  shall  remain  unpaid  on  the  fifteenth 
day  of  February  after  it  shall  become  due  and  payable  may  be  recov- 
ered by  said  receiver  in  the  name  and  on  behalf  of  said  city  in  an 
action  brought  in  any  court  of  competent  jurisdiction. 


Section  44. 

45- 
46. 

47. 
48. 

49. 

50. 
51. 

52. 


ARTICLE   6. 
General  Provisions. 

Set  off  as  between  habitation  tax  and  occupation  tax. 

Deduction  of  salaries  tax  from  habitation  tax. 

Deduction  of  taxes  payable  hereunder  from  the  per- 
sonal property  tax. 

Deduction  by  member  of  partnership. 

Allowance  of  deduction  or  cancellation. 

Board  of  taxes  and  assessments  to  make  rules  and 
regulations. 

Taxes  to  be  paid  into  the  general  fund. 

Contents  of  returns  not  to  be  divulged;  penalty  for 
violation. 

When  act  to  take  effect. 


§44.  Set  off  as  between  habitation  tax  and  occupation  tax.  If  any 
person  shall  be  liable  to  pay  a  habitation  tax  and  also  an  occupation  tax 
in  any  year,  he  shall  not  be  required  to  pay  both  taxes,  but  upon  the 
payment  of  the  larger  in  amount  of  the  two  taxes,  shall  be  entitled  to 
have  the  other  cancelled. 

§45.  Deduction  of  salaries  tax  from  habitation  tax  or  occupation 
tax.  If  a  person  liable  to  pay  a  habitation  tax  or  an  occupation  tax  shall, 
within  the  year  next  preceding  the  time  when  the  said  tax  shall  become  due 
and  payable,  have  paid  a  salaries  tax,  or  if  a  salaries  tax  shall  have  been 
withheld  from  him  under  the  provisions  of  this  act,  the  amount  of  salaries 
tax  so  paid  or  withheld  shall  be  deducted  from  the  amount  of  habitation 
tax  or  occupation  tax  for  which  he  may  be  liable.  If,  however,  any 
salary  with  reference  to  which  a  salaries  tax  is  paid  shall  be  for  work 
done  on  premises  of  the  employer,  the  salaries  tax  paid  with  reference 
thereto  shall  not  be  deducted  from  the  amount  of  occupation  tax  as- 
sessed against  the  person  liable  to  pay  such  salaries  tax. 

§46.  Deduction  of  taxes  payable  hereunder  from  personal  prop- 
erty tax.  Any  person  assessed  for  a  tax  on  personal  property  in  said 
city,  who  shall  within  the  year  next  preceding  the  time  when  the  said 
tax  becomes  due  and  payable  have  paid  any  tax  imposed  by  this  act, 
shall  be  entitled  to  a  deduction  from  the  amount  of  the  tax  on  personal 
property  payable  by  him,  of  the  amount  of  all  taxes  paid  by  him  under 
the  provisions  of  this  act,  including  the  salaries  tax  withheld  from  him, 
during  the  said  period  of  one  year. 

§47.  Deduction  by  member  of  partnership.  Whenever  an  occupa- 
tion tax  or  a  salaries  tax  shall  have  been  paid  by  a  partnership  under 
such  circumstances  that  if  the  said  tax  had  been  paid  by  a  member  of 

390 


r 


such  partnership,  he  would,  under  the  provisions  of  this  article,  be 
entitled  to  a  deduction  or  offset  of  the  amount  so  paid  from  or  against 
any  other  tax  for  which  he  may  be  liable,  such  partner  shall  be  entitled 
to  deduct  so  much  of  the  tax  paid  by  such  partnership  as  is  chargeable 
against  his  proportionate  interest  in  the  partnership. 

§48.  Allowance  of  deduction  or  cancellation.  Where  any  person 
shall  be  entitled  under  the  provisions  of  this  article  to  any  deduction 
from  or  cancellation  of  a  tax  for  which  he  would  otherwise  be  liable, 
the  department  of  taxes  and  assessments  of  said  city  upon  receiving 
proof  of  the  facts  entitling  him  to  such  deduction  or  cancellation  in  such 
manner  and  form  as  may  be  prescribed  by  said  department,  shall  cause 
the  said  deduction  or  cancellation  to  be  noted  upon  the  appropriate 
record  and  shall  transmit  to  the  receiver  of  taxes  or  the  collector  of  as- 
sessments and  arrears  of  said  city  as  the  case  may  be,  its  certificate 
setting  forth  under  its  hand  and  seal  the  fact  of  such  reduction  or  can- 
cellation. 

§49.  Board  of  taxes  and  assessments  to  make  rules  and  regula- 
tions. The  board  of  taxes  and  assessments  shall  have  power  to  make 
rules  and  regulations  regarding  the  assessment,  levy  and  collection  of 
the  taxes  provided  for  by  this  chapter. 

§50.  Taxes  to  be  paid  into  the  general  fund.  All  sums  collected 
by  reason  of  the  taxes  provided  for  by  this  act  shall  be  paid  into  the 
general  fund  of  the  city  of  New  York  for  the  reduction  of  taxation. 

§51.  Contents  of  returns  not  to  be  divulged;  penalty  for  violation. 
1.  Returns  filed  under  the  provisions  of  this  act  shall  not  be  open  to 
inspection,  excepting  upon  an  order  for  such  inspection  to  be  made  by 
a  justice  of  the  supreme  court  in  the  first  judicial  district. 

2.  It  shall  be  unlawful  for  any  officer  or  employee  of  the  said 
city  to  divulge  or  to  make  known  in  any  manner  whatever  not  provided 
by  law  to  any  person  the  contents  of  any  such  return  or  of  any  portion 
thereof,  or  any  fact,  matter  or  thing  set  forth  or  disclosed  therein,  or 
to  permit  any  such  return  or  copy  thereof  or  record  containing  any 
abstract  or  particulars  thereof  to  be  seen  or  examined  by  any  person 
except  as  provided  by  law. 

3.  Any  person  violating  any  provision  of  this  section  shall  be 
guilty  of  a  misdemeanor. 

§52.  When  act  to  take  effect.  This  act  shall  take  eflFect  immedi- 
ately. 


391 


INCREMENT  TAX  BILL. 

the  SSIhti^l'^^sion  oT^oFrr/t  ^''^  V''"^  *°  >t«  introduction  at 

AsseL'bV!^rL°cVi%S;s°^  ^^-  ^-•''  -P---^^  in  Senate  and 

aHHitinn^o  /°''  PU-'Pose  of  imposing  a  tax  upon  the  increment  in 
aS  Assessment.  ^Tlu  * -f  "P.°"./"=''  ^"^t^'  the  department  o^  taxes 
'n  the  booTs  for  h^  ,  "*^  °^  ^T  J''^'^  '^^^  ""*«  t°  be  included 
e^titl  i;.n»  ^I  ?"""^'  '■'^'"''■'^  °f  the  assessed  valuation  of  real 

act  two^HH.vP'°T'^i  '"  ''"  °"  ^'^''t  ''""dred  and  ninety-two  of  [his 
act,  two  additional  columns,  in  the  first  of  which  there  shall  be  set 
down   in   each  year  the   basic  value,   as   hereinafter  defined    of  each 

t^t^Z^TtlfJTu  'J  ''''r^''  ^'^"P*  specia?  franchises.  anS 
th.  o!  A  Jhere  shall  be  set  down  the  amount,  if  any  by  which 
the  assessed  value  of  such  parcel   for   the  currem  year    asLsed  as  if 

purpoL^o'fTrr*''  'rt  '"?  ^^^^  ^^'"•^'  ^^ich  exceW  "S loathe 
purpose  of  this  law,  be  deemed  the  increment.     The  basic  value  of  anv 

parcel  of  real  estate  shall  be  the  assessed  valuation  of  such  pared  assessed 
as  if  wholly  unimproved,  as  the  same  will  appear  on  the  annuaf  record 
of  assessed  valuations  of  real  estate  for  the  year  nTneteen  hundred  and 
fifteen;  provided,  however,  that  if  at  any  time'^during  a  period  beghmin. 
ten  thrZh^ft"  *?,^^^°'><1  Monday  of  January,  nineteen  hundrfd  and 
!h»'  *      ^  which  period  any  such  parcel  shall  have  been  owned  by 

the  same  person  who  shall  be  the  owner  thereof  on  the  first  day  of  March 
nineteen  hundred  and  fifteen,  such  premises  shall  have  been  asses  ed  upon 
the  annual  record  of  assessed  valuations  for  more  than  the  assessed  "aC 
of  such  parcel  for  the  year  nineteen  hundred  and  fifteen  the  highest 
assessed  value  during  such  period  shall  be  the  basic  value  of  such  parcel 
If  during  such  period  such  parcel  or  any  part  thereof  shall  have  been 
assessed  as  part  of  another  parcel,  the  assessed  values  of  such  parcels  shall 
be  apportioned  for  the  purpose  of  ascertaining  such  basic  value  Such 
basic  value  shall  be  mcreased  from  time  to  time  by  adding  to  the  assessed 
valuation  determined  as  hereinbefore  provided  the  amount  of  any  and 
all  assessments  for  public  or  local  improvements  becoming  due  after  the 
date  of  the  assessment  with  reference  to  which  the  basic  value  is  deter- 
mined and  the  reasonable  cost  (when  incurred)  of  bringing  the  land  to 
the  established  street  level,  of  making  connections  for  water  li^ht  and 
sewage  and  street  openings,  when  made  at  the  expense  of  the  owner  of  the 
^^!  lu  2  '^^f  ^"l  separately  assessed  parcel  of  real  estate  is  divided 
after  the  first  day  of  March,  ninenteen  hundred  and  fifteen,  the  board  of 
taxes  and  assessments  shall  apportion  the  basic  value  thereof  in  the  same 
manner  and  in  the  same  ratio  as  the  assessed  value  thereof  as  wholly  unim- 
proved land  shall  or  may  be  apportioned  under  the  provisions  of  section 

393 


sfil  be  comhin^H  ■  r*^"*"^""*  °/  *''  ^<^' '  =^"^  '"  ^^'^  ^^P^^'^  parcels 
tion  of  th™^-  '  K  ^-  ^«Pf  ^tely  assessed  parcel,  appropriate  combina- 
Th^  «L  *  "^^^uhing  basic  values  and  increments  shall  likewise  be  entered 
The  said  increment  shall  be  taxed  at  the  rate  of  one  per  centum  per 
annum  and  such  tax  shall  be  levied  and  collected  and  te  a  Ha^^u^i^ 
he  real  estate  in  the  same  manner  as  other  taxes  on  real  estate.    AppTa 

dZrtmem?  '"Jf  *°  ^T  ""'"'^  ^^^"  ^  "^^^  *°  ^nd  determine^^b?  the 
department  o.  taxes  and  assessments  at  the  same  time  and  in  the  same 

manner  as  apphcat.ons  for  reductions  of  the  assessment  of  real  esTaTe 
aWe  J;  St™L*'°"       '"''^  department  thereon  shall  be  similariy  revle!': 

^AA  ^^^'^^if"  "■"«  hundred  of  the  Greater  New  York  Charter  as 
amended  by  chapter  four  hundred  and  fifty-one  of  the  laws  of  nineteen 
hundred  and  fourteen  is  hereby  amended  to  read  as  follows:  "'"^teen 

ft,»  ^^^;  /°''  *}"*  purpose  of  enabling  the  board  of  aldermen  to  impose 
the  annual  taxes  it  shall  be  the  duty  of  the  comptroller  of  said  city  to  pre- 
pare and  submit  to  said  board,  at  least  one  week  before  the  first  day  of 

law^,,thnr?^^H  ^  u  ^''^^  Jl^""'  ^  ^t^tem*"*  '^"'"S  *°rth  the  amounts  by 
law  authorized  to  be  raised  by  tax  in  that  year,  on  account  of  the  corpo- 
ration of  the  City  of  New  York,  as  hereby  constituted,  or  for  city  pu^^s 
within  said  city,  as  created  by  this  act,  and  purposes  for  which  said  city 
IS  liable,  and  on  account  of  the  counties  of  New  York    Kin<'s    Bronx 
?.ZZ'  ^"f  R'^hmond,  and  also  an  estimate  of  the  probable  amoumof 
receipts  into  the  city  treasury  during  the  then  current  year  from  all  the 
sources  of  revenue  of  the  general  funds,  includinq  receipts  from  the  /ar 
Zn  /  '"/''I'!''''' J»^Posed  as  provided  in  section  eight  hundred  and  ninetv- 
two-b  of  thts  act   and  including  surplus  revenue  from  the  sinking  funds 
of  the  mayor,  aldermen  and  commonalty  of  the  city  of  New  York  and  o> 
any  of  the  municipal  and  public  corporations,  or  parts  of  municipal  and 
public  corporations,  by  this  act  consolidated  with  the  municipal  corpora- 
^on  known  as  the  mayor,  aldermen  and  commonalty  of  the  city  of  New 
York,  other  than  the  surplus  of  revenue  of  any  such  sinking  funds  for  the 
payment  of  interest  on  the  city  debt  of  the  municipal  corporation  known 
as  the  mayor  aldermen  and  commonalty  of  the  city  of  New  York  or  the 
like  debts  of  the  municipal  and  public  corporations  by  this  act  consolidated 
as  aforesaid    and  the  said  board  of  aldermen  is  hereby  authorized  and 
directed  to  deduct    the  total  amount  of  such  estimated  receipts  from  the 
aggregate  amount  of  all  the  various  sums  which,  bv  law,  it  is  required  to 
order  and  cause  to  be  raised  by  tax  in  said  year,  for  the  purposes  afore 
said,  and  to  cause  to  be  raised  by  tax  such  sums  as  shall  be  as  neariv  as 
possible,  but  not  less  than  the  balance  of  such  aggregate  amount  after 
making  such  deductions,  by  fixing  a  tax  rate  in  cents  and  hundredths  of  I 
cent  upon  each  dollar  of  assessed  valuation. 
§3.     This  act  shall  take  eflFect  immediately. 


393 


BILLS  FOR  ADMINISTRATIVE  CHANGES 

PREPARED  BY  THE  COMMITTEE 


A 


BILL    NUMBER    i. 

AN  ACT  to  amend  the  tax  law,  in  relation  to  the  exemption  of  real 
property  of  certain  corporations. 

The  People  of  the  State  of  New  York,  represented  in  Senate  and 
Assembly,  do  enact  as  follows : 

Section  1.  Subdivision  seven  of  section  four  of  chapter  sixty-two 
of  the  laws  of  ninteen  hundred  and  nine,  entitled,  "An  Act  in  Relation 
to  Taxation,  Constituting  Chapter  Sixty  of  the  Consolidated  Laws,"  is 
hereby  amended  to  read  as  follows: 

7.  The  real  property  of  a  corporation  or  association  organized  exclu- 
sively for  the  moral  or  mental  improvement  of  men  or  women,  or  for 
religious,  bible,  tract,  charitable,  benevolent,  missionary,  hospital,  infirm- 
ary, educational,  scientific,  literary,  library,  patriotic,  historical  or  cenieteiy 
purposes,  or  for  the  enforcement  of  laws  relating  to  children  or  animals, 
or  for  two  or  more  such  purposes,  and  used  exclusively  for  carrying  out 
thereupon  one  or  more  of  such  purposes,  and  the  personal  property  of  any 
such  corporation  shall  be  exempt  from  taxation.  But  no  such  corporation 
or  association  shall  be  entitled  to  any  such  exemption  if  any  officer,  mem- 
ber or  employee  thereof  shall  receive  or  may  be  lawfully  entitled  to  receive 
any  pecuniary  profit  from  the  operations  thereof,  except  reasonable  com- 
pensation for  services  in  effecting  one  or  more  of  such  purposes,  or  as 
proper  beneficiaries  of  its  strictly  charitable  purposes;  or  if  the  organiza- 
tion thereof  for  any  such  avowed  purposes  be  a  guise  or  pretense  for 
directly  or  indirectly  making  any  other  pecuniary  profit  for  such  corpora- 
tion or  association,  or  for  any  of  its  members  or  employees,  or  if  it  be  not 
in  good  faith  organized  or  conducted  exclusively  for  one  or  more  of  such 
purposes.  The  real  proerty  of  any  such  corporation  or  association  entitled 
to  such  exemption  held  by  it  exclusively  for  one  or  more  of  such  purposes 
and  from  which  no  rents,  profits,  or  income  are  derived,  shall  be  so  exempt, 
though  not  in  actual  use  therefor  by  reason  of  the  absence  of  suitable 
buildings  or  improvements  thereon,  if  the  construction  of  such  buildinjrs 
or  improvements  is  in  progress  [or  is  in  good  faith  contemplated  by  such 
corporation  or  association] ;  or  if  such  real  property  is  held  by  such  corpo- 
ration or  association  upon  condition  that  the  title  thereto  shall  revert  in 
case  any  building  not  intended  and  suitable  for  one  or  more  of  such  pur- 
poses shall  be  erected  upon  said  premises  or  some  part  thereof.  The  real 
property  of  any  such  corporation  not  so  used  exclusively  for  carrying 
out  thereupon  one  or  more  of  such  purposes,  but  leased  or  otherwise  used 
for  other  purposes,  shall  not  be  exempt,  but  if  a  portion  only  of  any 
lot  or  building  of  any  such  corporation  or  association  is  used  exclusively 
for  carrying  out  thereupon  one  or  more  such  purposes  of  any  such  corp(> 
ration  or  association,  then  such  lot  or  building  shall  be  so  exempt  only  to 

895 


i 


portion' to1hl''ex?el,To/  T  P"!*'""  f  "^^^'  ^"^^  '^e  remaining  or  other 
shall  be  V^,hil.w     .      t**  ^^'"*  °f  «"<=•!  remaining  or  other  portion 

fratemit^anH  fnt T  ^  *'  members,  or  subordinate  bodies  of  such 
J^ftr^  lu        .■       *e  accommodation  of  other  fraternal  bodies  or  a«o 

or  to  De  used  to  build,  furnish  and  maintan  an  asylum  or  asvlum.:  a 
home  or  homes,  a  school  or  schools,  for  the  free  educ/tion  or  relief  ^Ihe 
members  of  such  fraternity,  or  for  the  relief,  support  and  clre  of  worthv 
and  indigent  members  of  the  fraternity,  their  wives  w"dows  or  orTans^ 
shall  be  exempt  from  taxation,  and  provided  also,  that Te  real   S 

clas"  shin  nof  h'."'^  'a'^"^:  ''T'  '"  ^"^  ^'"^&«  "*  *«  Sfrd  or  fourth 
Class,  shall  not  be  taxed  as  to  that  portion  thereof  leased  or  otherwk^ 

used   for  purposes  of  income,   when  such  income  is  necessa^fnr^„^ 

^ThLT''"^  V"'  T'"*^?.^«  ^"<1  support  of  such  Hbra^/°'prop^ 
erty  held  by  any  oflf.cer  of  a  religious  denomination  shall  be  entitled  to  X 

TVfi";'P*'°"''..'Ml'J«':t  to  the  same  conditions  and  exceptfons   as  oron 
erty  held  by  a  religious  corporation.  exceptions,  as  prop- 

§2.     This  Act  shall  take  effect 


BILL   NUMBER   2. 

rate  ^^Sk^*^^  *°  ^"""""^  *^  ^"^  '^"^  '"  '"^'''*'°"  '°  *^^  taxation  of  corpo- 

AsseX^dTL^f  arfiirs:^'  ^^^  ^°''^'  '''''-'''''  '"  '^^'^  -<^ 

Section  1.  Section  twelve  of  chapter  sixty-two  of  the  laws  of  nine- 
teen hundred  and  nine,  entitled,  "An  Act  in  Relation  to  Taxat^n  Constl 
reld^as  foCsf '"*^  °'  *'  Consolidated  Laws,"  is  hereby  amended  to 

^.r,Jl\t  Taxation  of  corporate  stock.  The  capital  stock  of  every  com- 
pany liable  to  taxation,  except  such  part  of  it  as  shall  have  been  exceptTd 
m  the  assessment  roll  or  shall  be  exempt  by  law,  together  with  its  3us 

Zf^^-°'  TV'  *""^i,  [exceeding  ten  per  centum  of  [ts^iitaljaier 
deducting  the  [assessed]  value  of  its  real  estate,  and  all  shares  of  stock 
in  other  corporations  actually  owned  by  such  company  which  are  taxable 

rrctuaTvalu':      '*"^  ""^''  *'  '^^^  "^  *'^  ^**'^'  '^'^  ^  asLS  at 
§2.     This  Act  shall  take  effect 


BILL   NUMBER   3. 

•  1  "^^  ^^^  *o  ^"^^"^  the  tax  law  in  relation  to  information  to  be  fur- 
nished by  the  State  Board  of  Tax  Commissioners  for  the  use  of  local 
assessors. 

396 


r 


AsseX^^otLcfa^fcSows-"'  "^^^^  '^"^'^'  ''''''^^''  ^  Senate  and 

ninetirrunLd'S"„i!r'ent;^;r^.A'^^^^^^  ^'T.T  "'  *%'^*^  °' 
Constituting  Chaoter  Sivv;>f?k  7?'      r^      ^*x'"  Relation  to  Taxation, 

by  insertinf  thereS   afte7slH,vl^°"f '"^^'"^  ^^'■"  '^  ^^'^^y  tended 
division  fivf,  to  read  as  follows  "  '  '  "'"  ^"Wivision,  to  be  sub- 

^lBS^^^^t^^  xr^ar  st- 

a  wrj.en  sta.ment^rfc^  ^Vt^^^^^^^^  bo^af  c^nUiS^: 

ratioi!^-  '  ""*"'  °^  '"""^  P^""^°'^'  copartnership,  association    "rcol^- 

of  sic'hre5"eitf'lSfnJ^i:ffrK,°\^^^^  ^^^^ssed  parcel 

which  such  p^S^ytSsVin^'Sdar'^^^^  '^^  ^ 

boari'l^y  su^i%?r ^  l^'a^Sshio   ^"'  T^  •'^^"'  ^  ^^^^^  to  said 
duction^vXe  anT  present  XeJ\r/h'M*r  °""  ^'^'-POf^tion,  the  repro- 

In  the  city  of  New  York  said  statement  shall  be  filed  with  th^  ^«.,« 
ment   of   taxes   and    assessments,    and    not   with    the    ritv    .1.5.     T  J 
city  clerk  shall,  within  five  days'after  the  re'dpt  by  hTm\f  such  state 
ment,  deliver  a  copy  thereof,  certified  by  him    to  the  asse.sor.Ti  !!»l 
officers  charged  with  the  duty  of  making  local  asses^menL        %        ^I 
city.     Each  town  clerk  shall,  within  five  days  after  thTrl. J  . '^^  ?'** 
of  such  stat«„e„t,  deliver  copies  thereof ,  certified  by  hSn'   t^'Z  d^rk  '"? 
the  board  of  supervisors  of  the  county,  to  the  supervUor  of  th^  [„ 

subdivision  ^     '  ^  '  '"^°™ation  necessary  to  comply  with  this 

§2.     This  Act  shall  take  effect 


BILL   NUMBER   4. 

AN  ACT  to  repeal  section  forty-eight  of  the  tax  law. 

AsseX  d-nac?  as^o'^sf^  ^^^  ^°^'''  -P---^<'  »  Senate  and 
ninetfeThTnired'^t^ine'^eSlhLt  °4  *«. '-'s  of 

397 


\j 


BILL   NUMBER   5. 

•  u  "^^  ^?^  }^  ^™^^^  ^^  *^^  ^^^'  ^^  relation  to  information  to  be  fur- 
nished by  the  Secretary  of  State  to  local  assessors. 

A      "^uf  ^f^^^^  ^^  *^  ^^^^^  °^  New  York,  represented  in  Senate  and 
Assembly,  do  enact  as  follows: 

Section  1.  Section  two  hundred  and  four  of  chapter  sixty-two  of 
tibe  laws  of  mneteen  hundred  and  nine,  entitled,  "An  Act  in  Relation  to 
1  axation,  Constitutmg  Chapter  Sixty  of  the  Consolidated  Laws,"  is  hereby 
amended  to  read  as  follows: 

§204  Reports  to  be  made  by  the  secretary  of  state.  The  secretary 
of  state  shall  transmit  on  the  first  day  of  each  month  to  the  comptroller 
a  report  of  the  stock  corporations  whose  certificates  of  incorporation  are 
hied,  or  of  the  foreign  stock  corporations  to  whom  a  certificate  of  authority 
has  been  issued  to  do  business  in  this  state,  during  the  preceding  month, 
buch  report  shall  state  the  name  of  the  corporation,  its  place  of  business, 
the  amount  of  its  capital  stock,  its  purposes  or  objects,  the  names  and 
places  of  residence  of  its  directors,  and,  if  a  foreign  corporation,  its  place 
of  business  within  the  state.  The  comptroller  may  prescribe  the  forms 
and  furnish  the  blanks  for  such  reports.  The  secretary  of  state  shall 
make  like  reports  to  the  comptroller  whenever  required  by  him  relating 
to  any  such  corporations  whose  certificates  have  been  filed  or  to'  whom  a 
certificate  of  authority  has  been  issued  prior  to  the  time  when  this  article 
takes  effect,  and  during  any  period  of  time  specified  by  the  comptroller 
in  his  request  for  such  report. 

The  secretary  of  state  shall  transmit  on  the  first  day  of  each  month 
to  the  clerk  of  each  city  or  town  a  report  of  all  stock  corporations  having 
ihetr  principal  place  of  business  within  the  state  in  such  city  or  town  with 
respect  to  which  there  shall  have  been  filed  during  the  preceding  month 
any  certificate  of  incorporation,  copy  of  an  order  authorizing  such  corpo- 
ration to  change  its  name,  certificate  of  change  of  place  of  business,  certifi- 
cate of  increase  or  reduction  of  capital  stock,  or  certificate  of  consolidation 
or  merger  or  to  which,  if  a  foreign  stock  corporation,  a  certificate  of  author- 
ity shall  have  been  issued  during  the  preceding  month.  Such  report  shall 
state  the  name  of  the  corporation,  its  place  of  business,  the  amount  of  its 
capital  stock,  its  purposes  or  objects,  the  names  and  places  of  residence 
of  Its  directors,  and,  if  a  foreign  corporation,  its  place  of  business  within 
the  state;  also  a  general  description  of  the  papers  filed  with  respect  to 
such  corporation  during  the  preceding  month,  and  in  case  of  a  change  of 
name,  the  former  name  and  the  new  name;  in  case  of  a  change  of  place  of 
business,  the  former  place  of  business  and  the  new  place  of  business:  in 
case  of  an  increase  or  reduction  of  capital  stock,  the  amount  of  the  former 
capital  stock  and  of  the  capital  stock  as  changed,  and  in  case  of  a  consoli- 
dation or  merger,  the  names  of  the  consolidating  or  merging  corporations 
and  of  the  consolidated  or  merged  corporation.  Each  city  clerk  shall, 
within  five  days  after  receipt  by  him  of  such  report,  deliver  a  copy  thereof, 
certified  by  him,  to  the  assessors  or  other  officers  charged  with  the  duty 
of  making  local  assessments  in  the  said  city.  Each  "  town  clerk  shall, 
within  five  days  after  the  receipt  by  him  of  such  report,  deliver  copies 
thereof,  certified  by  him,  to  the  clerk  of  the  board  of  supervisors  of  the 
county,  to  the  supervisor  of  the  town,  and  to  the  assessors  of  the  village 
or  villages  within  the  town  in  which  is  located  the  principal  place  of  busi- 
ness within  the  state  of  any  such  corporation.  In  the  city  of  New  York 
said  report  shall  be  transmitted  to  the  department  of  taxes  and  assess- 
ments, and  not  to  the  city  clerk. 

§2.     This  Act  shall  take  effect 

398 


1^ 


V 


■  ^i 


COLUMBIA  UNIVERSITY  LIBRARIES 

This  book  is  due  on  the  date  indicated  below,  or  at  the 
expiration  of  a  definite  period  after  the  date  of  borrowing,  as 
provided  by  the  rules  of  the  Library  or  by  special  arrange- 
ment with  the  Librarian  in  charge. 


DATE  BORROWED 

1 

DATE  DUE 

DATE  BORROWED 

DATE  DUE 

AUG  2 9  7S4 

•1 

yUN*7    '^ 

Z  fACi 

( 

C2S(n4l)M100 

COLUMBIA  UNIVERSITY  LIBRARIES 


0041420799 


fTlSH  OV233 

OCT  2  7mA 


D685 


N48 
cop. 2 


"»» 


D683 

Final  report  of  the 


N48 
cop. 2 


Committee  on  taxation. 


NOV  2  n  tc}c 


JUN  1 5  1950 


END  OF 

TITLE 


